Question

(a) Discuss why a duopoly oligopoly will tend to collude rather than

to compete when both parties are of equal size and produce similar product.    (5 marks)
 
(b) Discuss why supermarket(s) can be classified either as oligopoly or monopoly market in different geographical areas.                       (5 marks)
 
(c) Define dominant strategy.                                                       (2 marks)
 
(d) In the table below, given two prisoners can play two different strategies (to confess or lie), and payoff "-8" means 8 years in jail. In the same cell inside the table, there are two numbers, left one belongs to prisoner 1 and right one belongs to prisoner 2 (e.g. top right corner cell, 0 is payoff for prisoner 1 while -10 is payoff for prisoner 2). Describe the most likely outcome of this prisoners' game.


Confess Lie
Confess -8,-8 0,-10


Lie -10,0 -1,-1