Problem: Two fast food restaurants, John's Burgers and Ken's Burgers, are engaged in quantity competition in a small town. Both restaurants can produce either 10,000 or 15,000 meals. If both restaurants produce 10,000 meals, they will each earn $50,000 in profit.
If they both produce 15,000 meals, they will each earn $40,000 profit. If one produces 10,000 meals and the other produces 15,000, then the restaurant that produces less will earn a profit of $30,000 and the restaurant that produces more will earn a profit of $60,000.
Explain how repeated interaction between John's Burgers and Ken's Burgers would alter the game described above. Could this repeated interaction result in a different equilibrium output? Explain why/why not.