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Medium · Game Theory & Logic · Quant Trader interview question · game-theory, prisoners-dilemma, trading-strategy
Two algorithmic trading firms, Alpha and Beta, are competing in a market. They can choose to cooperate (C) by limiting their trading activity to maintain higher profits for both, or defect (D) by aggressively trading to capture a larger market share, potentially lowering profits for both. This interaction is modeled as an iterated Prisoner's Dilemma. Alpha decides to implement a Tit-for-Tat strategy. Which of the following best describes the Tit-for-Tat strategy and explains why it tends to be a