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  • Card 11 / 19:
    Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as shown in the prisoner’s dilemma box in . Firm B colludes with Firm A Firm B cheats by selling more output Firm A colludes with Firm B A gets $1,000, B gets $100 A gets $800, B gets $200 Firm A cheats by selling more output A gets $1,050, B gets $50 A gets $500, B gets $20 Assuming that the payoffs are known to both firms, what is the likely outcome in this case?

    Firm B reasons that if it cheats and Firm A does not notice, it will double its money. Since Firm A’s profits will decline substantially, however, it is likely that Firm A will notice and if so, Firm A will cheat also, with the result that Firm B will lose 90% of what it gained by cheating. Firm A will reason that Firm B is unlikely to risk cheating. If neither firm cheats, Firm A earns $1000. If Firm A cheats, assuming Firm B does not cheat, A can boost its profits only a little, since Firm B is so small. If both firms cheat, then Firm A loses at least 50% of what it could have earned. The possibility of a small gain ($50) is probably not enough to induce Firm A to cheat, so in this case it is likely that both firms will collude.

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Questions & Answers

what is implicit cost
fuseini Reply
Yeah
MOHAMED
any cost that has already occurred but not necessarily shown or reported as a separate expense.
President
The links don't seem to be working
Scorch Reply
what is taxonomy
wise Reply
how to interprets elasticity
Joseph Reply
what is demand curve
Joseph
It is the graphical representation of quantity demand of a commodity?
Kofi
it is the graphical representation of price and quantity demanded of a commodity
Obaa
what is the difference between positive economics and normative economics.
pauline Reply
It said that positive economics studies the facts, but normative one focus on ought to be.
Mohammad
in another words normative economics focuses on what the fair situation is.
Mohammad
positive economics: wages are 10$ per hour. normative economics: wages should be 25$ per hour.
Mohammad
what is choice
Hamis Reply
what is indifference curve
Misba Reply
It is an alternative combination of consumption of two goods which gives equal level of satisfaction.
Shujjat
good morning guys.. I am Lawrence from Nigeria.. trust am welcome here..
Lawrence Reply
Lovely morning bro... Welcome 💕
Kosiso
ur most welcome lawrence
Kun
Welcome back to another session,happy Friday morning
Dumbuya
good morning guys I'm Oumar Kromah from Côte d'ivoire am I welcome here
Oumar
lovely morning bro welcome
Malak
i dont understand on economics
Noor
i m from pakistan
Noor
mashallah
Tanveer
I am from Nepal
OP
i m Pakistan
Malak
Am Gabriel from Ghana
Kwame
hmmm
Noor
are you ecnomist?
Noor
Am Eben Paak from Ghana
Eben
Okay.. Nice meeting us
Kosiso
l am James Borbor from Liberia
jackie
I am a researcher
jackie
you all are ecnomost
Noor
ohh nice
Noor
re search on economy
Noor
what is demand
Milton Reply
yes
Malak
Link seems to not work
Jayden Reply
what is an opportunity cost?
Azotikemah Reply
next best alternative cost...
suresh
Meaning of Economics
Kamara Reply
It can be define as the practical science that studies human relationship between End's and scare means which have alternative uses in all aspect of human life
Kosiso
what's the meaning of pure and impure
Levinel
Pure is free from immoral behavior or quality,Impure not clean dirty,filthy containing something that is in pure
Dumbuya
what is economics
Malak Reply
Economics is a social science which deals with humans behavior
Dumbuya
Explain two reasons why trade union membership may decline in a country
Pop Reply
analyse the factors that influence the strength of a trade union.
Pop
discuss whether or not trade unions benefit workers
Pop
nice questions guys
Kun
Firstly, to what extent is it willing to backup an employee or worker Secondly , is it effective in sustaining a valid point
Scorch
what is demand
ALALE Reply
what's the difference between elastic and inelastic
ALALE
The desire to purchase goods and services at a particular price
Dumbuya
Elastic: demand is price sensitive. Inelastic: demand is not price sensitive.
Ernest

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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