Reference no: EM132346232

In business, strategic situations like the advertising game presented are played more than once --- the firms evaluate their strategies periodically and can repeat these games for many months, quarters, or years into the indefinite future. One set of strategies used by firms are known as trigger strategies. After one firm deviates from cooperation, the other firms switch their behavior to non-cooperative actions for a certain amount of time. As such, firms are rewarded for cooperation and deviation initiates (or triggers) punishment. Many years ago, the railroads cooperated with each other to set high freight shipping rates -- if one of the railroads cut shipping fees below the agreed level, then all firms would cut their shipping fees to unprofitable levels for several weeks or months.

Can you think of any modern examples from business in which firms use trigger strategies when dealing with each other? Are there situations in our personal relationships that look like trigger strategies? Please explain your responses