ECO. 401 ONLINE QUIZ/ASSIGNMENT (Application of game theory to oligopolistic markets—15/4/2025)
Application of game theory to oligopolistic markets
SECTION A
Essay Questions
- Explain the concept of oligopoly and how it differs from other market structures such as monopoly and perfect competition. Discuss the implications of these differences for game theory applications.
- Analyze the significance of Nash Equilibrium in the context of oligopolistic markets. Provide examples of how firms might reach Nash Equilibrium in pricing strategies.
- Discuss the role of collusion in oligopolies. How can game theory help in understanding the incentives for firms to collude or compete?
- Evaluate the impact of repeated games on firm behavior in oligopolistic markets. How does the possibility of future interactions influence current decision-making?
- Examine the concept of the prisoner’s dilemma in relation to oligopolistic pricing strategies. How might firms navigate this dilemma in real-world scenarios?
- Explore the concept of dominant strategies in game theory. How can the presence or absence of dominant strategies affect competition among oligopolistic firms?
- Assess the implications of asymmetric information in oligopolistic markets. How does game theory address scenarios where firms have unequal access to information?
- Discuss the application of mixed strategies in oligopoly. Provide examples of situations where firms may adopt mixed strategies rather than pure strategies.
- Analyze the effects of government regulation on oligopolistic markets through the lens of game theory. What strategies might firms employ in response to regulatory changes?
- Reflect on the future of oligopolistic competition in the context of technological advancements and globalization. How might game theory evolve to address these changes?
Multiple Choice Questions
- What characterizes an oligopolistic market?
-
- A) Many buyers and sellers
- B) A single seller
- C) A few large firms dominating the market
- D) Perfect information for all participants
- 2 Which of the following is a common feature of oligopoly?
- A) Homogeneous products
- B) Price takers
- C) Barriers to entry
- D) Perfect mobility of resources
- In game theory, what is a Nash Equilibrium?
- A) A scenario where one player benefits at the expense of another
- B) A situation where players choose strategies that are optimal given the strategies of others
- C) A situation where players can negotiate binding contracts
- D) A dominant strategy for all players
- What is collusion?
- A) Independent decision-making by firms
- B) An agreement among firms to limit competition
- C) Competing on price exclusively
- D) A strategy to increase market share aggressively
- The prisoner’s dilemma illustrates the conflict between:
- A) Cooperation and competition
- B) Price and quantity competition
- C) Demand and supply
- D) Monopoly and oligopoly
- If two firms in an oligopoly decide to set the same price to maximize joint profits, they are engaging in:
- A) Price competition
- B) Collusion
- C) Price discrimination
- D) Market segmentation
- A dominant strategy is one that:
- A) Always results in the highest payoff for a player regardless of what others do
- B) Is the best strategy only if the other player’s strategy is known
- C) Is chosen based on the history of previous games
- D) Is the worst strategy for a player
- In a repeated game scenario, firms may:
- A) Ignore previous outcomes
- B) Change strategies based on past interactions
- C) Always choose their dominant strategy
- D) Avoid cooperation
- Asymmetric information in oligopoly can lead to:
- A) Perfect competition
- B) Market failure
- C) Increased transparency
- D) Better consumer choices
- Mixed strategies in game theory refer to:
- A) Choosing a single strategy that is most beneficial
- B) Randomizing over multiple strategies to keep opponents uncertain
- C) Always cooperating regardless of the opponent’s actions
- D) Using a dominant strategy only
- Which of the following best describes “price leadership” in oligopoly?
- A) A firm sets the price and others follow
- B) All firms set prices independently
- C) Prices are determined by consumer demand
- D) Prices fluctuate based on production costs
- What is the “kinked demand curve” theory?
- A) Demand is perfectly elastic
- B) Demand is less elastic for price increases than for price decreases
- C) Firms have no pricing power
- D) Demand is uniform across different price levels
- In terms of game theory, what is the best response?
- A) The strategy that maximizes a player’s payoff given other players’ strategies
- B) The strategy that minimizes losses
- C) The strategy that leads to collusion
- D) The strategy that players agree upon
- Which of the following would NOT be a strategy in an oligopolistic market?
- A) Price wars
- B) Product differentiation
- C) Perfect competition
- D) Collusion
- A firm in an oligopoly might choose to engage in non-price competition by:
- A) Lowering prices to increase sales
- B) Increasing advertising and brand loyalty
- C) Reducing production costs
- D) Increasing prices across the board
- What is the outcome when firms in an oligopoly act independently?
- A) Market equilibrium
- B) Higher prices and reduced output
- C) Increased competition
- D) Lower prices and increased output
- Which of the following could be considered a barrier to entry in an oligopolistic market?
- A) Free access to technology
- B) High startup costs
- C) Perfect competition
- D) Consumer preference for new entrants
- In the context of game theory, “backward induction” is used to:
- A) Determine the optimal strategy from the end of the game
- B) Predict the future strategies of competitors
- C) Analyze simultaneous moves of players
- D) Establish market dominance
- Which of the following is an example of a non-cooperative game?
- A) A cartel agreement
- B) Price-setting among competitors without communication
- C) Joint advertising campaigns
- D) Market entry strategies
- A firm that assumes its competitors will match its price decreases but not price increases is likely operating under:
- A) A perfectly competitive market
- B) Kinked demand theory
- C) Monopoly behavior
- D) Total competition
- The “Shadow of the Future” concept implies that:
- A) Players only consider the current game
- B) Future interactions will influence current decisions
- C) Collusion is never possible
- D) Players cannot predict future outcomes
- In an oligopoly, which strategy is likely when firms are uncertain about competitors’ actions?
- A) Complete cooperation
- B) Random pricing
- C) Hesitant price cuts
- D) Guaranteed market share
- The term “conjectural variation” refers to:
- A) The assumptions firms make about their rivals’ behavior
- B) The actual market price
- C) The number of firms in an oligopoly
- D) The cost structure of a firm
- Which of the following is most likely to encourage oligopolistic firms to collude?
- A) High market demand variability
- B) Similar cost structures among firms
- C) Frequent entry of new competitors
- D) Diverse product offerings
- The term “bertrand competition” refers to:
- A) Competition based on product quality
- B) Price competition among firms
- C) Competition based on advertising
- D) Quantity competition
- If a firm in an oligopoly has a cost advantage, it may choose to:
- A) Maintain high prices
- B) Lower prices to increase market share
- C) Form a cartel
- D) Exit the market
- In the context of oligopolistic markets, “price rigidity” refers to:
- A) Frequent changes in prices
- B) Prices remaining stable despite changes in costs
- C) Prices set by government regulations
- D) Fluctuating prices based on consumer demand
- Which of the following strategies is LEAST likely to be used by firms in an oligopoly?
- A) Aggressive price cutting
- B) Product innovation
- C) Collusion
- D) Perfect price discrimination
- If a firm chooses a pricing strategy based on competitors’ prices, this is known as:
- A) Cost-plus pricing
- B) Value-based pricing
- C) Competitive pricing
- D) Dynamic pricing
- In a strategic game, what does a “payoff matrix” illustrate?
- A) The average cost of production
- B) The outcomes based on different strategies chosen by players
- C) The market demand curve
- D) The total revenue of firms
- What is the main goal of game theory in the context of oligopoly?
- A) To eliminate competition
- B) To analyze decision-making among interdependent firms
- C) To regulate prices
- D) To ensure market efficiency
- Which of the following is NOT a reason why firms in oligopoly may not collude?
- A) Legal restrictions against collusion
- B) The presence of potential entrants
- C) Differentiated products
- D) Lack of communication
- A firm in an oligopoly may use “limit pricing” to:
- A) Maximize short-term profits
- B) Discourage entry by setting a price low enough to make entry unprofitable
- C) Engage in price wars
- D) Increase market share through aggressive advertising
- When firms in an oligopoly react to each other’s price changes, this is known as:
- A) Interdependence
- B) Independence
- C) Isolation
- D) Competition
- A “Stackelberg model” in oligopoly refers to:
- A) Simultaneous decision-making
- B) Sequential decision-making
- C) Perfect competition
- D) Collusive agreements
- In an oligopoly, firms may choose to differentiate their products to:
- A) Increase production costs
- B) Gain a competitive edge
- C) Reduce market share
- D) Promote collusion
- If a firm uses a strategy of “tit-for-tat,” it is likely employing:
- A) A one-time pricing strategy
- B) A retaliation-focused strategy based on previous actions of competitors
- C) An aggressive market entry tactic
- D) A purely random strategy
- A firm in an oligopoly may prefer non-price competition when:
- A) Price wars are expected
- B) It wants to avoid legal scrutiny
- C) It is unable to lower prices without incurring losses
- D) Consumers are indifferent to price changes
- In an oligopoly, “exit barriers” refer to:
- A) Costs associated with leaving the market
- B) High costs of market entry
- C) The ease of changing production methods
- D) Regulatory restrictions on competition
- Which of the following is a potential outcome of successful collusion in an oligopoly?
- A) Increased competition
- B) Higher prices and reduced output
- C) Greater product variety
- D) Lower profit margins
- “Game theory” primarily helps to analyze:
- A) Consumer behavior
- B) Firm strategies in competitive environments
- C) Government regulation effects
- D) Market demand shifts
- If a firm in an oligopoly faces a downward-sloping demand curve, it indicates:
- A) Perfectly elastic demand
- B) The ability to set prices above marginal cost
- C) Perfect competition
- D) Zero economic profit
- When firms engage in “price signaling,” they are:
- A) Communicating their pricing strategy to competitors
- B) Establishing a price floor
- C) Avoiding price competition
- D) Colluding openly
- In an oligopolistic market, a “cartel” is best described as:
- A) A formal agreement among firms to coordinate pricing and output
- B) A competitive pricing strategy
- C) A legal entity representing consumers
- D) A government intervention strategy
- “Cournot competition” refers to:
- A) Price competition among firms
- B) Competition based on quantities produced
- C) Non-price competition strategies
- D) Perfect competition scenarios
- Which of the following factors can lead to increased stability in an oligopolistic market?
- A) High levels of product differentiation
- B) Frequent entry and exit of firms
- C) Strong brand loyalty
- D) High price elasticity of demand
- Game theory can be used to predict:
- A) Consumer purchasing decisions
- B) The strategies firms will adopt in response to competitors
- C) The effects of government regulations
- D) The overall market demand curve
- In a market with a few dominant firms, if one firm lowers its prices, the other firms are likely to:
- A) Ignore the price change
- B) Lower their prices to maintain market share
- C) Raise their prices
- D) Increase their advertising budget
- In the context of oligopoly, “strategic behavior” refers to:
- A) The actions firms take based on their competitors’ expected responses
- B) The random pricing decisions made by firms
- C) The inherent inefficiencies in monopolistic markets
- D) The role of government regulations
- The “Bertrand paradox” suggests that in a duopoly with homogeneous products:
- A) Firms will always collude
- B) Prices will drop to marginal cost
- C) Firms will set prices above marginal cost
- D) There will be no competition
SECTION B
In studying the Application of Game Theory to Oligopoly Market and EQUILIBRIUM IN AN OLIGOPOLY MARKET, some models are important. These include: Cournot duopoly model, Stackelberg duopoly model,Bertrand duopoly model,Nash equilibrium, and prisoner’s dilemma. Answer the following questions based on the above models and concepts.
Cournot Duopoly Model
Theory Questions:
- What are the key assumptions underlying the Cournot duopoly model?
- How does the reaction function of one firm depend on the output decision of the other firm in the Cournot model?
- Compare and contrast the Cournot model with perfect competition in terms of market outcomes.
- What is the significance of the Nash equilibrium in the context of the Cournot duopoly model?
- How does the Cournot model explain the concept of interdependence among firms in an oligopoly?
Mathematical Questions:
- Given two firms with constant marginal costs C1 and C2, derive the reaction functions for both firms in a Cournot duopoly.
- If Firm 1’s reaction function is q1=(a−C1−q2)/2 and Firm 2’s reaction function is q2=(a−C2−q1)/2, find the equilibrium outputs q1and q2.
- Calculate the total market output and market price at equilibrium when the inverse demand function is given by P(Q)=a−bQ
- Determine the profit for each firm at equilibrium given their output levels and cost functions.
- Analyze how a change in Firm 1’s marginal cost affects the equilibrium outputs of both firms.
Stackelberg Duopoly Model
Theory Questions:
- What is the first-mover advantage in the Stackelberg model, and how does it differ from the Cournot model?
- Explain how the leader and follower firms determine their output levels in the Stackelberg duopoly model.
- Discuss the implications of asymmetric information in the Stackelberg model.
- How does the concept of Stackelberg equilibrium differ from Nash equilibrium?
- What are the potential impacts of government regulations on the Stackelberg equilibrium?
Mathematical Questions:
- If Firm 1 is the leader with a reaction function q1=(a−C1−q2)/2 and Firm 2 is the follower, derive Firm 2’s reaction function.
- Given the inverse demand function P(Q)=a−bQ, derive the output for the leader firm in a Stackelberg model.
- Calculate the equilibrium outputs q1 and q2 when Firm 1 leads and Firm 2 follows.
- Find the total market profit for both firms at Stackelberg equilibrium and compare it to Cournot equilibrium.
- How does the Stackelberg model predict market outcomes when there are more than two firms?
Bertrand Duopoly Model
Theory Questions:
- Explain the main assumptions of the Bertrand model and how it leads to different outcomes compared to the Cournot model.
- Discuss the role of price undercutting in the Bertrand duopoly model.
- What happens to prices and profits in a Bertrand equilibrium if firms have different marginal costs?
- How does the Bertrand model illustrate the concept of aggressive pricing strategies?
- What are the implications of product differentiation in the Bertrand model?
Mathematical Questions:
- If two firms have identical products and marginal costs C, derive the equilibrium price in a Bertrand duopoly.
- Given the demand function Q=D(P) and two firms with constant marginal costs, find the equilibrium quantities when prices are set below marginal costs.
- Calculate the profits for both firms in a Bertrand equilibrium when prices equal marginal costs.
- Analyze how the introduction of a third firm affects the price equilibrium in a Bertrand duopoly.
- If Firm 1 has a marginal cost C1 and Firm 2 has C2 (where C1<C2), find the equilibrium price and quantity for both firms.
Nash Equilibrium
Theory Questions:
- Define Nash equilibrium and explain its significance in oligopoly markets.
- Discuss how Nash equilibrium applies to both the Cournot and Bertrand models.
- What are the implications of Nash equilibrium for firms’ strategies in an oligopoly?
- Can a Nash equilibrium be Pareto optimal? Provide an example.
- How does the concept of Nash equilibrium relate to the prisoner’s dilemma?
Mathematical Questions:
- Given a payoff matrix for two firms in an oligopoly, identify the Nash equilibria within that matrix.
- For a game with two players and two strategies, derive the conditions for Nash equilibrium using best response functions.
- If the payoff for Firm A when both firms choose strategy 1 is (3,3), while choosing strategy 2 results in (2,4), determine the Nash equilibrium.
- Calculate the mixed strategy Nash equilibrium for a game where players can randomize over their actions.
- Analyze a simple game scenario with two firms where each has two strategies and identify the Nash equilibrium outcomes.
Prisoner’s Dilemma
Theory Questions:
- Describe the structure of the prisoner’s dilemma and its implications for cooperative behavior in oligopolies.
- How can the concept of the prisoner’s dilemma be applied to price-setting among competing firms?
- Discuss the role of repeated interactions in the resolution of the prisoner’s dilemma in an oligopoly.
- What strategies can firms use to overcome the prisoner’s dilemma in an oligopolistic market?
- How does the prisoner’s dilemma illustrate the conflict between individual rationality and collective benefit?
Mathematical Questions:
- Construct a payoff matrix for a prisoner’s dilemma with two players and analyze the Nash equilibrium.
- If the payoff of cooperating is R and the payoff of defecting is T, derive the conditions under which defection is the dominant strategy.
- Calculate the expected outcomes for players using a mixed strategy in a repeated prisoner’s dilemma.
- Given a specific payoff matrix, determine the dominant strategies for both players in a one-time prisoner’s dilemma game.
- Analyze how changes in the payoff structure (e.g., increasing the reward for cooperation) affect the likelihood of reaching a cooperative equilibrium.
SECTION C
In studying the Application of Game Theory to Oligopoly Market and EQUILIBRIUM IN AN OLIGOPOLY MARKET, some models are important. These include: Cournot duopoly model, Stackelberg duopoly model,Bertrand duopoly model,Nash equilibrium, and prisoner’s dilemma. Answer the following multiple choice questions based on the above models and concepts.
Cournot Duopoly Model
- In the Cournot duopoly model, firms compete by choosing: A) Price
B) Quantity
C) Quality
D) Advertising - The Cournot equilibrium occurs when: A) Both firms maximize profit simultaneously.
B) One firm changes its output after observing the other.
C) Prices are equal.
D) Marginal costs are equal. - In the Cournot model, if one firm increases its output, the other firm will: A) Decrease its output.
B) Increase its output.
C) Keep its output constant.
D) Exit the market. - The reaction function in the Cournot model shows: A) The prices firms will set.
B) The best response of one firm to the output of another.
C) Total market demand.
D) The cost structure of firms. - If two firms in a Cournot duopoly have identical cost structures, the equilibrium output will be: A) Equal for both firms.
B) Different for each firm.
C) Dependent on market demand.
D) Zero.
Stackelberg Duopoly Model
- In the Stackelberg model, firms compete by choosing: A) Price
B) Quantity
C) Market share
D) Advertising - The leader in the Stackelberg model is: A) The firm that chooses its quantity first.
B) The firm with the lowest cost.
C) The firm that sets the price.
D) The firm with the largest market share. - The follower in the Stackelberg model reacts to: A) The market demand.
B) The leader’s output choice.
C) The price set by the leader.
D) The average output of both firms. - In the Stackelberg model, the leader typically earns: A) Lower profits than the follower.
B) Higher profits than the follower.
C) Equal profits to the follower.
D) No profits. - The main advantage of being a Stackelberg leader is: A) Lower production costs.
B) Ability to set prices.
C) First-mover advantage in output decision.
D) More market power.
Bertrand Duopoly Model
- In the Bertrand model, firms compete by choosing: A) Quantity
B) Advertising
C) Price
D) Quality - In a Bertrand duopoly with homogeneous products, if one firm lowers its price, the other firm will: A) Raise its price.
B) Keep its price constant.
C) Lower its price.
D) Exit the market. - The Nash equilibrium in a Bertrand model typically results in: A) Positive economic profits for both firms.
B) Zero economic profits for both firms.
C) High prices for consumers.
D) Collusion between firms. - If firms in a Bertrand duopoly have differentiated products, the outcome is likely to be: A) A price war.
B) Higher prices than in a homogeneous product scenario.
C) Zero profits for both firms.
D) Collusion. - The Bertrand paradox suggests that: A) Firms will always collude.
B) Price competition leads to zero profits.
C) Quantity competition is more effective.
D) Firms will always set high prices.
Nash Equilibrium
- A Nash equilibrium occurs when: A) All players are maximizing their payoffs given the strategies of others.
B) One player can improve their payoff by changing their strategy.
C) Players are colluding.
D) Market prices are equal. - In a Nash equilibrium, how many players can change their strategies without reducing their payoffs? A) None
B) One
C) Two
D) All - The concept of Nash equilibrium can be applied to: A) Only price competition.
B) Only quantity competition.
C) Any strategic interaction.
D) Only collusion scenarios. - In the context of oligopoly, Nash equilibrium helps explain: A) The necessity of collusion.
B) The stability of market prices.
C) The entry of new firms.
D) The decline of market power. - A dominant strategy equilibrium occurs when: A) A player has no dominant strategy.
B) A player has a strategy that is best regardless of others’ actions.
C) Players collude to maximize joint profits.
D) Players change strategies frequently.
Prisoner’s Dilemma
- The prisoner’s dilemma illustrates a situation where: A) Players have complete information.
B) Cooperation leads to a worse outcome for both.
C) Players always benefit from cooperation.
D) Outcomes depend solely on external factors. - In the classic prisoner’s dilemma, if both players choose to betray each other, the result is: A) The best collective outcome.
B) A suboptimal outcome for both.
C) A win for one player.
D) Mutual cooperation. - In a repeated prisoner’s dilemma, players can achieve better outcomes through: A) Constant betrayal.
B) Random strategy selection.
C) Establishing a reputation for cooperation.
D) Changing partners frequently. - A dominant strategy in the prisoner’s dilemma typically leads to: A) Mutual cooperation.
B) Mutual betrayal.
C) One player gaining a significant advantage.
D) Random outcomes. - In the context of oligopoly, the prisoner’s dilemma can explain: A) Why firms always collude.
B) Why firms might not cooperate even if it is mutually beneficial.
C) The need for government intervention.
D) Why firms exit the market.
General Oligopoly Concepts
- An oligopoly market is characterized by: A) Many small firms.
B) A single dominant firm.
C) A few large firms that dominate the market.
D) Perfect competition. - The kinked demand curve model suggests that: A) Firms will always match price increases.
B) Firms will ignore price decreases.
C) The market will always reach equilibrium.
D) Prices are rigid in oligopoly markets. - Collusion in an oligopoly can lead to: A) Increased competition.
B) Higher prices and profits.
C) Market entry by new firms.
D) Reduced market power for existing firms. - The likelihood of collusion is higher when: A) There are many firms in the market.
B) Products are highly differentiated.
C) Firms have similar costs and products.
D) Market demand is elastic. - The Herfindahl-Hirschman Index (HHI) measures: A) Market demand.
B) Market concentration.
C) Firm profitability.
D) Consumer surplus.
Advanced Concepts
- In a repeated game scenario, the shadow of the future can: A) Encourage cooperation among firms.
B) Discourage any interaction.
C) Lead to increased competition.
D) Have no effect on strategy. - Which of the following is a characteristic of a dominant strategy? A) It is only optimal in specific scenarios.
B) It is the best choice regardless of what others do.
C) It changes based on market conditions.
D) It requires cooperation. - The concept of mixed strategies in game theory refers to: A) Using a single strategy in all scenarios.
B) Randomizing over possible strategies to keep opponents off-balance.
C) Always choosing the dominant strategy.
D) Focusing on collusion. - An oligopolist’s best response to a competitor’s price increase is generally to: A) Increase its own price.
B) Decrease its price.
C) Maintain its price.
D) Collude with the competitor. - Which of the following is NOT a feature of oligopoly? A) Interdependence of firms.
B) Homogeneous products.
C) Barriers to entry.
D) Price rigidity. - In a Cournot duopoly with identical costs, if Firm A produces 50 units, how much will Firm B produce at equilibrium? A) 50 units
B) 25 units
C) 0 units
D) 100 units - If Firm X is the leader in a Stackelberg model and produces 70 units, how would Firm Y likely respond? A) Produce more than 70 units.
B) Produce less than 70 units.
C) Produce exactly 70 units.
D) Exit the market. - If two firms in a Bertrand model set prices below marginal cost, what is the likely outcome? A) Both firms will earn profits.
B) Both firms will incur losses.
C) One firm will dominate the market.
D) Prices will stabilize. - In a Nash equilibrium involving two firms, if one firm lowers its price, the other firm will: A) Raise its price to maintain profit.
B) Lower its price in response.
C) Keep its price constant.
D) Exit the market. - The repeated prisoner’s dilemma can lead to: A) Permanent competition.
B) Better cooperation over time.
C) Less predictable outcomes.
D) Guaranteed collusion.
Evaluative Questions
- Which model best explains the behavior of firms in a market with significant product differentiation? A) Cournot model
B) Stackelberg model
C) Bertrand model
D) Kinked demand model - If firms in an oligopoly face a kinked demand curve, what happens if one firm raises its prices? A) Other firms will follow suit.
B) Other firms will not change their prices.
C) The firm raising prices will lose market share.
D) Prices will stabilize at a higher level. - The main reason for price rigidity in oligopolistic markets is: A) High competition.
B) Cost structures.
C) Fear of competitive reactions.
D) Collusion among firms. - Which of the following strategies might a firm use to sustain collusion? A) Price underselling
B) Random pricing
C) Communication and monitoring
D) Aggressive advertising - The outcome of a Nash equilibrium in a competitive oligopoly typically results in: A) Maximal joint profits for firms.
B) Minimization of consumer surplus.
C) A stable price that is above marginal cost.
D) No price competition. - In a Cournot model, what happens to the equilibrium quantities if the market demand increases? A) Both firms’ outputs will decrease.
B) Both firms’ outputs will increase.
C) Only one firm’s output will change.
D) There will be no effect on output. - In a Bertrand model, if firms have different costs, the firm with the lower cost will: A) Always set the price.
B) Match the higher-cost firm’s price.
C) Undercut the higher-cost firm’s price.
D) Exit the market. - The concept of “marginal cost pricing” in oligopoly suggests that: A) Firms cannot compete on price.
B) Prices are set above marginal cost.
C) Prices equal marginal cost in equilibrium.
D) Price competition leads to zero profits. - In the prisoner’s dilemma, the Nash equilibrium involves: A) Mutual cooperation.
B) Mutual defection.
C) One player cooperating while the other defects.
D) Random strategies. - The primary challenge for firms in an oligopoly is: A) Setting prices too high.
B) Deciding whether to cooperate or compete.
C) Managing production costs.
D) Attracting new customers.
