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Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the

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Sometimes oligopolies in the same industry are very different in size. Suppose we have a

duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as shown

in the prisoner's dilemma box in Table 5.

Assuming that the payoffs are known to both firms, what is the likely outcome in this

case?

image text in transcribedimage text in transcribed
Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as shown in the prisoner's dilemma box in Table 5. Firm B colludes with Firm B cheats by Firm A selling more output Firm A colludes with Firm A gets $1,000, B A gets $800, B gets B gets $100 $200 Firm A cheats by selling A gets $1,050, B A gets $500, B gets more output gets $50 $20 Assuming that the payoffs are known to both firms, what is the likely outcome in this case?ELISE! Would you expect the kinked demand curve to be more extreme [like a right angle] or less extreme [like a normal demand curve} if each rm in the cartel produces a near- identical product like OPEC and petroleum? What if each rm produces a somewhat different product? Explain your reasoning

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