Practice question · Select all that apply
Which conditions help sustain tacit cooperation (high prices) in a repeated oligopoly game?
Hints
- Cooperation survives on the shadow of the future.
- A known final round unravels the whole arrangement backwards.
Show the answer
- A. Firms value future profits highly
- B. The game repeats with no known end date
- D. Firms can quickly detect a rival’s price cut
Why
Cooperation lives on the shadow of the future: indefinite repetition, fast detection, and patience. A known endgame unravels it, cheat in the last period, then the one before, all the way back.
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