When modeling an oligopoly as a prisoners dilemma problem the Nash equilibrium
A)involves one for choosing first and the other one second
B)is for the firms to collude
C)is for the firms to agree to collude and then both of them cheat
D)does not exist

Question

Quizplus · Accepted Answer

In a prisoner's dilemma model of oligopoly, the Nash equilibrium occurs when both firms choose the strategy that is best for themselves individually, regardless of what the other firm does. This often results in both firms cheating on a collusive agreement, as each firm has an incentive to cheat to gain more market share or profit, assuming the other will stick to the agreement. This outcome is not optimal for the collective (as colluding would be), but it is stable because neither firm can benefit by unilaterally changing its strategy from cheating to cooperating.

When Modeling an Oligopoly as a Prisoners Dilemma Problem the Nash