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-Consider the Pricing Game Depicted in Figure 5

Question 2

Multiple Choice

-Consider the pricing game depicted in Figure 5.5 in which payoffs are in millions of dollars. Suppose that this game is played repeatedly and the probability that the game will end in the next stage is 20 percent and the discount rate is 20 percent. What is the present value of the stream of payoffs by not cooperating?

A) $8 million.
B) $12 million.
C) $18 million.
D) $30 million.
E) $108 million.

-Consider the Pricing Game Depicted in Figure 5

Multiple Choice

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Correct Answer:
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