Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.

-Refer to Figure 17-1.If this game is played repeatedly and ABC uses a tit-for-tat strategy,it will choose a
A) high level of output in the first round and in subsequent rounds it will choose whatever XYZ chose in the previous round.
B) low level of output in the first round and in subsequent rounds it will choose whatever XYZ chose in the previous round.
C) high level of output in all rounds, regardless of the choice made by XYZ.
D) high level of output in all rounds, regardless of the choice made by XYZ

Question

Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.
 
-Refer to Figure 17-1.If this game is played repeatedly and ABC uses a tit-for-tat strategy,it will choose a
A) high level of output in the first round and in subsequent rounds it will choose whatever XYZ chose in the previous round. 
B) low level of output in the first round and in subsequent rounds it will choose whatever XYZ chose in the previous round. 
C) high level of output in all rounds, regardless of the choice made by XYZ. 
D) high level of output in all rounds, regardless of the choice made by XYZ

Quizplus · Accepted Answer

A tit-for-tat strategy involves choosing the same action as the other player chose in the previous round. In this case, if ABC uses a tit-for-tat strategy and XYZ chooses a low level of output in the first round, then ABC will also choose a low level of output in the first round. In subsequent rounds, ABC will choose whatever level of output XYZ chooses in the previous round. This strategy can create a cooperative outcome where both companies choose the high level of output and earn the highest possible profits.