ECON 1050 Chapter 15: Economics-1 (1) (dragged) 3
17 Sep 2016
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A bad outcome: for the prisoners, the equilibrium of the game is not the best outcome. If neither confesses, each gets a 2-year sentence. No, it can"t because each prisoner can figure out that there is a best strategy for each of them. Each knows that it is not in his best interest to deny. A game like the prisoners" dilemma is played in duopoly. A duopoly is a market in which there are only two produces that compete. Figure 15. 2 describes the cost and demand situation in a natural duopoly in which two firms, Part (a) shows each firm"s cost curves. Part (b) shows the market demand curve. Two firms can meet the market demand at the lest cost. What is the price and quantity produced in equilibrium. Suppose that the two firms enter into a collusive agreement. A collusive agreement is an agreement between two (or more) firms to restrict output, raise the price, and increase profits.
