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Think of the customers of the 2 firms as the police officer who caught them and are going to charge them in court :) He can "put the blame, all of it" on the one who do not confess and let the other go. Here, the customer has perfect information about the prices of the product (quite the same, almost homogeneous) and would get from the cheaper firm. This is like the PC industry, but not fully though. Therefore, the firm which sets a lower price and cheats (in the context of the prisoner dilemma) would capture the whole market and increase it's profit. (The one which confess would gain, provided the other does not) [Manage messages]
| 02/27/2001 12:56 AM by Brandon; Prisoners' dilemma |
Hi! See if I can help...
Well, the typical translation of the prisoners' dilemma to economics translate their plight into the situation of duopolists deciding on their pricing. If both set a high price, their profit is higher [View full text and thread]
| 02/26/2001 03:40 PM by T.L.; Question about pricing theory |
In the prisoner's dilemma, competitor A & B benefit by raising price (more profits). But Prof. Levine says competitor A can get more utility by not raising price and stay low price. I don't understand this. It seems competitor B [View full text and thread]
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