Question 1

In the context of repeated games, what distinguishes a tit-for-tat strategy from a trigger strategy?

Accepted Answer

Tit-for-tat mirrors the opponent's previous action, while trigger strategy cooperates until the opponent cheats, then never cooperates again.

Question 2

Suppose Jack and Jill are playing a repeated game. If Jack employs a tit-for-tat strategy and Jill cooperated last period, what will Jack do this period?

Accepted Answer

Jack will cooperate this period.

Question 3

If Jill cheated last period and Jack employs a tit-for-tat strategy, what will Jack's profit be this period according to the provided payoff matrix?

Accepted Answer

$1,500

Question 4

Which of the following best describes a repeated game in microeconomics?

Accepted Answer

A game that is played multiple times, allowing players to adjust strategies based on past outcomes.

Question 5

Consider the following scenario: Jack and Jill are in an oligopoly and play a repeated game. If both use a trigger strategy and one cheats, what is the likely long-term outcome?

Accepted Answer

Both will never cooperate again.

Question 6

If Jack and Jill both cooperate in a repeated game, and the cooperative outcome gives Jack $$1,800 and Jill 2$$,000, what is the total profit for both players?

Accepted Answer

$3,800

Question 7

Suppose Jack employs a tit-for-tat strategy. If Jill cheated last period, what will Jack's total profit equal this period?

Accepted Answer

$1,500

Question 8

In a repeated game, why might firms be able to sustain collusion more easily than in a one-shot game?

Accepted Answer

Because repeated interaction allows for punishment strategies that deter cheating.

Question 9

If Jack and Jill are playing a repeated game and Jack uses a trigger strategy, what will Jack do if Jill cheats in period 3?

Accepted Answer

Jack will never cooperate again.

Question 10

Given the following payoffs: If both Jack and Jill cooperate, Jack earns $$1,800. If Jack cheats and Jill cooperates, Jack earns 2$$,000. If both cheat, Jack earns $$1,500. If Jack cooperates and Jill cheats, Jack earns 1$$,600. If Jack employs a tit-for-tat strategy and Jill cheated last period, what is Jack's profit this period?

Accepted Answer

$1,500

Question 11

Which of the following is a necessary condition for a trigger strategy to be effective in sustaining cooperation in a repeated game?

Accepted Answer

Players must value future payoffs sufficiently (i.e., have a high discount factor).

Question 12

Suppose Jack and Jill are playing a repeated game. If Jack employs a tit-for-tat strategy and Jill cooperates this period, how many gallons will Jack produce?

Accepted Answer

30 gallons

Question 13

In the context of oligopoly, what is the main advantage of using a tit-for-tat strategy?

Accepted Answer

It allows for immediate and proportional punishment for cheating, encouraging cooperation.

Question 14

If the present value of future cooperation is less than the one-time gain from cheating, what will rational players do in a repeated game?

Accepted Answer

They will cheat.

Question 15

Which of the following equations represents the present value $$PV of an $$infinite stream of cooperative profits $$\pi$$ per period, discounted at rate $$r$$?

Accepted Answer

$$ PV = \frac{\pi}{r} $$

Question 16

If Jack and Jill are playing a repeated game and both use tit-for-tat strategies, what is the likely long-term outcome if neither cheats?

Accepted Answer

They will continue to cooperate.

Question 17

Suppose the discount factor $$\delta is $$low in a repeated game. What does this imply about the likelihood of sustaining cooperation?

Accepted Answer

Cooperation is less likely because future payoffs are valued less.

Question 18

In a repeated game, which strategy is most forgiving after a single defection?

Accepted Answer

Tit-for-tat

Question 19

If Jack and Jill are playing a repeated game and Jack uses a trigger strategy, what will Jack do if Jill cheats in period 2 but cooperates in all other periods?

Accepted Answer

Jack will never cooperate again after period 2.

Question 20

Which of the following best explains why repeated games can lead to different outcomes than one-shot games?

Accepted Answer

Players can use strategies that reward cooperation and punish defection over time.

Repeated Games and Strategies in Oligopoly

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