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Japan and Australia are the two largest producers of pearls in the world. However, they occupy very different niches in the market: Australia dominates the

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Japan and Australia are the two largest producers of pearls in the world. However, they occupy very different niches in the market: Australia dominates the market for high-quality pearls, while Japan dominates the market for low- and middle-quality pearls. Australia's pearls are produced in the territorial waters of Western Australia where the combination of pristine ocean waters, sheltered bays, and huge tides provide the ideal environment for oysters to produce large and exquisitely beautiful pearls. Only a small number of pearls were harvested in Australia prior to the introduction of diving equipment and air pumps in the 1880s. By the early 1970s, Australian pearling companies were typically using boats with large crews and sophisticated electronics to track down oysters. The competition among Australian companies to snare oysters from freely accessible waters raised the specter that oysters were being tracked down faster than was efficient. In this case, the total number of hours spent diving for oysters each year would have exceeded the efficient number. a. In the mid-1970s, the ten owners of the Australian oyster fleet met to discuss their concerns that too many divers were being used to harvest oysters. They agreed among themselves to reduce their effort by accepting limits on the total number of diving hours that each of the ten firms would employ in harvesting oysters. However, all of them cheated on the agreement, using more divers and spending more time harvesting oysters than they had agreed to. If it was efficient to reduce their effort, why were they unable to solve this problem? Suppose the oyster population would have eventually been decimated had none of the companies changed their behavior. Would you have expected the companies to have eventually solved the problem? Use the prisoner's dilemma model to support your

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