In a country, 13 fresh chicken suppliers together accounting for 90% of market share have received a
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Question:
In a country, 13 fresh chicken suppliers together accounting for 90% of market share have received a record $27 million fine for operating as a cartel, fixing prices at a high level and restricting output. To achieve this, representatives of the firms repeatedly met at the Poultry Merchants' Association. Analyse the interaction between the firms using game theory. Simplify your model to only 2 players representing the different firms in this industry. Present a payoff matrix to model the situation and analyse it for Nash equilibrium. Which is the best outcome for each firm? Which is the best outcome for society as a whole? Why did government invest in the costly investigation and prosecution of these companies?
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