Question

In the context of strategy, what specifically does this mean? Please emphasize the following concepts in your answer: market structure, collusion, and the prisoner's dilemma.

Answer 1

✓ in the market structure of oligopoly, wherein few organizations produce and sell similar kind of Products. These firms though few in number may enjoy strong power and market influencing capacity. To get advantage of these power, they may enter into an illegal agreement known as collusion, for setting the price of output level to maximize profits. This results in higher price for Product and limited output. This collision may lead to monopolistic power and firms may earn higher revenue. In this market condition, the firm may face prisoner's dilemma, in which the firms find it very difficult to co-operate due to their differences in strength and capabilities. Though there is mutual benefits for each firm but every firm act in a self interest way resulting in collective sub optimal income. It is a situation where the firm may not be in position to co-operate and help each other due to differences in their strengths and greed to acquire larger share than other.