Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as the prisoner’s dilemma box in Table 10.4 shows. Firm B colludes with Firm A Firm B cheats by selling more output Firm A colludes with Firm B A gets $1,000, B gets $100 A gets $800, B gets $200 Firm A cheats by selling more output A gets $1,050, B gets $50 A gets $500, B gets $20 Table10.4 Assuming that both firms know the payoffs, what is the likely outcome in this case?
Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as the prisoner’s dilemma box in Table 10.4 shows. Firm B colludes with Firm A Firm B cheats by selling more output Firm A colludes with Firm B A gets $1,000, B gets $100 A gets $800, B gets $200 Firm A cheats by selling more output A gets $1,050, B gets $50 A gets $500, B gets $20 Table10.4 Assuming that both firms know the payoffs, what is the likely outcome in this case?
Chapter10: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 9SQP
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Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as the prisoner’s dilemma box in Table 10.4 shows.
|
Firm B colludes with Firm A |
Firm B cheats by selling more output |
|
|
Firm A colludes with Firm B |
A gets $1,000, B gets $100 |
A gets $800, B gets $200 |
|
Firm A cheats by selling more output |
A gets $1,050, B gets $50 |
A gets $500, B gets $20 |
Table10.4
Assuming that both firms know the payoffs, what is the likely outcome in this case?
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