Again, both firms playing their dominant strategy leads to a troubling outcome. Because each one is individually better off charging the low price they both end up with lower profits than if they could agree to charge the high price (for now don't worry that such agreements are illegal).

   This outcome only makes sense if the game is played only once. In other words, the firms must set prices once and leave them set forever. If they can change prices frequently (as of course they can) then this becomes a repeated game and, as we shall see, the outcome may be different. We will look at these games extensively in the section on repeated games.

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