Question

Briefly explain how situations described by "the prisoner's dilemma" can result in reduced profits for oligopolies. (6 points) HTML Editorín B I VA - A - I E333 x V c TTT 12pt Paragra I I

Answer 1

a prisoners dilemma what happens is that the strategy of other player is unknown, so that the firms engaging in oligopoly might get to choose a strategy according to the anticipation of the other competitor moves and come to a comewhich they feel is the optimal but due to unknown factor there is a better alternative that still exists away from the equilibrium and in this way prisoner's dilemma can result in reduced profits

For example, take the case of game oligopoly

Example B low hig b low (0,o) / (17,-2) high /(-2, 17)|(9,9)

this is an example of prisoner's dilemma because there is still a better alternative that exists if they co-operate with each other