Economics 1021A Chapter 15

1 year for bob 10 years for art prisoners dilemma

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Unformatted text preview: nd Art denies. (1 year for Bob, 10 years for Art) Prisoners’ Dilemma Payoff Matrix Prisoners’ Art’s strategies Confess Deny 3 years 10 years Confess Bob’s strategies 3 years 1 year 1 year 2 years Deny 10 years 2 years The Prisoners’ Dilemma The In a Nash equilibrium, each player takes their best possible action given the action of their opponent. In equilibrium, both will confess. Each thinks: • If I confess, but my accomplice does not, my sentence will only be 1 year. This is better for me than 2 years. • If my accomplice confesses, but I do not, my sentence will be 10 years. If I confess too, I will only have a 3-year sentence. Oligopoly Game Oligopoly Team A $10 Team B $9 $8 $10 16, 16 13, 19 9 ,22 $9 18, 13 15, 15 12, 18 $8 20, 10 16, 12 13, 14 An Oligopoly Price-Fixing Game Game • Duopoly – a market structure with two firms. • Cartel – a group of firms that enter into a collusive agreement. • Collusive agreement – an agreement between 2 or more firms to restrict output, raise prices and increase profits – Illegal in Canada Individual Firm MC MC 10 ATC 6 Minimum ATC 0 1 2 3 4...
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This document was uploaded on 04/03/2014.

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