What is a grim trigger strategy in a two firm repeated game?
A)A strategy where a firm will always aggress regardless of how the other firm acts
B)A strategy where a firm will always cooperate regardless of how the other firm acts
C)A strategy in which a firm is prepared to match whatever changes in strategy the competitor makes
D)A strategy in which a firm initially cooperates and then aggresses for the rest of the game as soon as the opponent aggresses
E)A strategy in which a firm is prepared to aggress when its opponent cooperates and cooperate when its opponent aggresses

Question

Quizplus · Accepted Answer

In a grim trigger strategy, a firm initially cooperates and then aggresses for the rest of the game as soon as the opponent aggresses. This is done to ensure that the opponent understands the cost of defecting and the benefits of cooperation. Option D is the only choice that explains this strategy.

What Is a Grim Trigger Strategy in a Two Firm