Some weeks ago we discussed price competition with identical products. Two firms sell a homogeneous product...

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Some weeks ago we discussed price competition with identical products. Two firms sell a homogeneous product and set prices simultaneously; both firms have the same unit cost of production. Suppose now that those two firms engage in indefinitely repeated interaction of this stage game. Find out if grim-trigger strategies can sustain cooperation at the most desired outcome (half of the monopoly 1 profits for each firm, that is, ).¹ Some weeks ago we discussed price competition with identical products. Two firms sell a homogeneous product and set prices simultaneously; both firms have the same unit cost of production. Suppose now that those two firms engage in indefinitely repeated interaction of this stage game. Find out if grim-trigger strategies can sustain cooperation at the most desired outcome (half of the monopoly 1 profits for each firm, that is, ).¹