The paradoxical nature of the oligopoly game can be described by the fact that even though the monopoly outcome is best for all the oligopolists:
A)they cheat themselves out of monopoly profits by increasing production
B)they collude to set output level equivalent to the Nash equilibrium
C)they do not behave as profit maximisers
D)self-interest juxtaposes the profits earned at the Nash equilibrium

Question

Quizplus · Accepted Answer

In an oligopoly, each firm has an incentive to reduce production in order to increase the price and therefore earn higher profits. However, if all firms reduce production, this leads to a monopoly outcome where they can collectively earn even higher profits. The paradox is that even though the monopoly outcome is best for all the oligopolists, they are unlikely to achieve it because they have an incentive to cheat and increase production to gain more market share. This ultimately results in lower profits for all firms compared to what they could earn at the monopoly outcome. Therefore, choice A accurately describes the paradoxical nature of the oligopoly game.

The Paradoxical Nature of the Oligopoly Game Can Be Described