How can a prisoner's dilemma solution be overcome?
Game theory analysis shows that when oligopolistic firms play the game repeatedly, they can place penalties in the game that discourage future breakdowns in cooperation. When two oligopolistic firms believe they will only face each other once in competition, each has an incentive to cheat and try to take market share away from the competition. However, if oligopolistic firms believe they will have a long-term relationship, one that benefits from mutual cooperation, then violating the other firm's trust is likely to result in a long-term reduction in profits. Therefore, the cooperative arrangement is more likely to be maintained.
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Which of the following is not characteristic of perfect competition?
a. many buyers and sellers b. brand name advertising c. standardized products d. fully informed buyers and sellers e. free entry and exit of firms
Which of the following statements is not true about a market system?
a. The market system provides an incentive to consumers to acquire purchasing ability. b. The market system magnifies the problem of scarcity of goods and services. c. The market system provides an incentive for allocating resources. d. The market system provides an incentive to improve the quality of goods produced. e. The market system provides everything everyone wants to consume.