The prisoner's dilemma has implications for the workings of oligopoly markets.The outcome in the prisoner's dilemma situation for oligopoly firms is
A)beneficial to society, in that the players cannot easily collude, so output is greater, and prices are lower.
B)beneficial to the players, since they can maintain a cartel agreement easily.
C)of little benefit to society, since the players produce the monopoly output.
D)beneficial to no one.

Question

Quizplus · Accepted Answer

In an oligopoly market, if firms collude and form a cartel agreement, they can limit output and raise prices, resulting in less output and higher prices for consumers. However, the prisoner's dilemma shows that it is difficult for firms to maintain this agreement, as each firm has an incentive to cheat and increase production for their own benefit. This leads to greater output and lower prices for consumers, which is beneficial for society. Therefore, the outcome in the prisoner's dilemma situation for oligopoly firms is beneficial to society, in that the players cannot easily collude, so output is greater, and prices are lower.

The Prisoner's Dilemma Has Implications for the Workings of Oligopoly