1. Explain how the Prisoner’s Dilemma can be useful in analyzing the behavior of firms toward one another. In particular, using a 2 x 2 table like the one we developed in class, explain why the strategic interaction between two companies that can charge either a high price or a low price may result in lower profits for both if they are acting competitively. Explain, again using the table, why there may be a tendency for firms to try to collude. Finally, explain why it may hard for firms to remain in the equilibrium in which they both collude (hint: what is the incentive for each player in the collusion equilibrium?) 2. Consider the determinants of the rate of profit. We have discussed a variety of strategies capitalists might employ to raise the rate of profit. Does using these strategies to increase r necessarily hurt workers? If not, which strategies hurt workers and which do not? 3. Write out the complete expression for profit you have learned, defining all the terms you use. Also write the expression for the profit rate. Describe four strategies to increase total profit as a way to increase the profit rate

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

1. Explain how the Prisoner’s Dilemma can be useful in analyzing the behavior of firms toward one another. In particular, using a 2 x 2 table like the one we developed in class, explain why the strategic interaction between two companies that can charge either a high price or a low price may result in lower profits for both if they are acting competitively. Explain, again using the table, why there may be a tendency for firms to try to collude. Finally, explain why it may hard for firms to remain in the equilibrium in which they both collude (hint: what is the incentive for each player in the collusion equilibrium?)

2. Consider the determinants of the rate of profit. We have discussed a variety of strategies capitalists might employ to raise the rate of profit. Does using these strategies to increase r necessarily hurt workers? If not, which strategies hurt workers and which do not?

3. Write out the complete expression for profit you have learned, defining all the terms you use. Also write the expression for the profit rate. Describe four strategies to increase total profit as a way to increase the profit rate

Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Knowledge Booster
Nash Equilibrium
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education