Question

why is the prisoner's dilemma game useful in studying oligopoly behavior?

a. because oligopolies make out like bandits

b. to illustrate the problems encountered when making decisions under uncertainty

c. to show that oligopolies behave as monopolists in the long run and earn positive economic profits.

d. to illustrate how barriers to entry lead to economic profits

Answer 1

Answer for this is B

Prisone's dilemma is a situation where two prisoners are been questioned over their guilt or innocence of crime.

they have simple choice to either confess or to deny their involvement and hope that their partners does likewise.

the pay-off in this game is measured in terms of years in the prison arising from their choices and is summarized in the form of the table . no kind of communication is permitted between the two aspects and each should make an independent decision . but surely they will take into account the likely behaviour of other when under interrogation . this highlights the importance of uncertainty in an oligopoly