Explain how the prisoners' dilemma can be used to examine pricing strategies in an oligopoly

What will be an ideal response?


The players can choose either a high-price strategy or a low-price strategy. If both choose high, they each make substantial profits. If both choose low, they each make smaller profits. If one chooses high and the other low, the one who chooses high makes low profits and the other makes the most profits possible. Each firm will choose low because that is their dominant strategy—regardless of what the other firm does, a firm has higher profits if it chooses the low-price strategy. When both choose low, though, their profits are less than they could have been.

Economics

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The set of tangencies between isoquants and isocosts is the firm's

a. production function. b. returns to scale. c. output maximization curve. d. expansion path.

Economics

The Coase Theorem explains how the ________ can come to a socially optimal solution.

A. government B. producers C. citizens D. market

Economics

It is possible for an economy to produce more than its potential level of output, at least for a short period of time

a. True b. False

Economics

What did Milton Friedman and E.S. Phelps argue with respect to the Phillips Curve?

A. The Phillips Curve could accurately guide activist policy makers over the long run. B. The inflation rate will consistently be 2 percentage points below the unemployment rate. C. The inverse relationship between unemployment and inflation only holds in the long run. In the short run, unemployment and inflation are positively related. D. Economic participants would soon understand activist policymakers' strategy and revise their expectations, making discretionary efforts to fine-tune the economy ineffective.

Economics