it cannot fail to note that – regardless of firm1’s previous pledge-the dominant strategy for firm1 in the last round is not to cooperate. True, this would violate the cooperation promised in firm1’s strategy. But there is nothing firm2 can do subsequently to punish firm1 for breaking its promise. There is no third round in which to implement such punishment . Absent the threat of such retaliation, firm1 can rationally be expected to adopt the noncooperative behavior in the last round.