Exhibit 11-4
-Refer to Exhibit 11-4. If both firms price at the monopoly price,

Question

Exhibit 11-4 
-Refer to Exhibit 11-4. If both firms price at the monopoly price,

Quizplus · Accepted Answer

If both firms price at the monopoly price, both firms will be tempted to charge the competitive price because they can capture a larger market share and increase profits. This is a classic example of the prisoner's dilemma where both firms are better off by deviating from the dominant strategy of pricing at the monopoly price. However, if only one firm deviates, the other firm will capture the entire market and the deviating firm will suffer losses, resulting in both firms choosing to price at the monopoly price.

Exhibit 11-4 -Refer to Exhibit 11-4. If Both Firms Price at the Price