FIRM A Compete Produce 35m Collude Produce 20m A: $200m profits A: $300 profits Collude Produce 30m B: $300m profits B: $170m profits FIRM B A: $50 m profits A: $100 profits Compete Produce 50m| B: $400m profits B: $200m profits This prisoner's dilemma game shows the payoffs associated with two firms, A and B, in an oligopoly and their choices to either collude with one another or not. According to the matrix shown, the outcome of the "game" will be: both firms will collude and act like a joint monopolist. both firms will compete. Firm A will compete and Firm B will collude. Firm B will compete and Firm A will collude.

FIRM A Compete Produce 35m Collude Produce 20m A: $200m profits A: $300 profits Collude Produce 30m B: $300m profits B: $170m profits FIRM B A: $50 m profits A: $100 profits Compete Produce 50m| B: $400m profits B: $200m profits This prisoner's dilemma game shows the payoffs associated with two firms, A and B, in an oligopoly and their choices to either collude with one another or not. According to the matrix shown, the outcome of the "game" will be: both firms will collude and act like a joint monopolist. both firms will compete. Firm A will compete and Firm B will collude. Firm B will compete and Firm A will collude.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.6P

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Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Film A) is large and the other film (Film B) is small, as the prisoners dilemma box in Table 10.4 shows. Assuming that both films know the payoffs, what is the likely outcome in this case?
Does each individual in a prisoners dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.
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