Define: monopolistic competition, product differentiation, oligopoly, cartel theoryDescribe how 'product differentiation' benefits a monopolistic competitorDescribe the 'Kinked Demand Curve' theory.Discuss two reasons why cartels are difficult to maintain.Provide 'real world' examples of monopoly, oligopoly, and cartelUsing the 'prisoners dilemma' example 13, what is the dominant strategy for both Bo and Luke?

Example 13: Bo and Luke are caught red-handed committing a crime (breaking and entering). The district attorney of Hazzard County suspects that they are also guilty of committing a more serious crime (the manufacture, transportation, and sale of illegal beverages). The D.A. has sufficient evidence to convict Bo and Luke of breaking and entering but does not have sufficient evidence to convict them of the more serious crime. If Bo and Luke do not confess that they have committed the more serious crime, they will be convicted of the lesser crime, and each will be sentenced to two years in prison. However, the D.A. believes that Bo and Luke can be persuaded to confess to the more serious crime The D.A. places Bo and Luke in separate cells so that they cannot communicate with each other. Then the D.A. speaks to Bo: "If you confess to the more serious crime and Luke does not confess, you will be given probation and Luke will be convicted of the more serious crime (based on your confession) and will be sentenced to ten years in prison. If Luke confesses to the more serious crime and you do not confess, Luke will be given probation and you will be convicted of the more serious crime and will be sentenced to ten years in prison. If you both confess, you will each be sentenced to five years in prison." The D.A. then presents the same alternatives to Luke. Will Bo and Luke confess that they have committed the more serious crime, or will they not confess? The payoff matrix below illustrates the strategies available to Bo and Luke and the payoff (results) of each pair of strategies: Bo's Strategies Confess Not Confess Bo - 5 years Bo - 10 years Confess Luke - 5 years Luke - probation Luke's Strategies Bo - probation Bo - 2 years Not Confess Luke - 10 years Luke - 2 years Bo will reason as follows: "If Luke confesses, then the best strategy for me is to confess. That way, I will only be sentenced to five years in prison instead of ten years. And if Luke does not confess, then the best strategy for me is to confess. That way, I will receive probation instead of being sentenced to two years in prison." Thus, Bo's dominant strategy is to confess