Prisoners Dilemma and Cheating on the Cartel

Prisoner's Dilemma:

1571_prisoners dilemma.jpg

This game is a symmetric. Although the pair would be best off by both Denying guilt, Confess is a dominant strategy for each. Consequently the dominant strategy equilibrium is the upper-left element of the game matrix. Yet if the two were innocent!

Cheating on the Cartel:

2480_cheating on the cartel.jpg

Suppose Coke and Pepsi consider to charge a high price for soda. If the game matrix were with payoffs in millions of dollars of profit per week, each firm has a dominant strategy of cheating on the cartel by charging the low price. The dominant strategy equilibrium is the lower-right element: the cartel falls apart despite the joint advantage of charging the high price.

With larger strategy spaces a few strategies can be dominated without leaving a dominant strategy. In such cases we eradicate dominated strategies iteratively. That is, some strategies that did not appear to be dominated do appear to be dominated once other dominated strategies are eliminated. That is true in the following example:

686_example of cartel.jpg

First, Jill does not have a dominant strategy. Her best reply depends on whether Jack plays (Left or Middle) or Right. Second however would jack ever play Right? No, Middle dominates Right (no matter what Jill does). So Right is a dominated strategy, and is irrelevant. Therefore, we have:

1036_dominated strategy.jpg

Third, having eliminated Jack playing Right, we now see that Jill playing Down can be eliminated: for Jill, the payoff to Up exceeds the payoff to Down no matter what Jack does.

Since Jill’s dominant strategy is Up, the dominant strategy equilibrium to this game is the upper-center element of the original game matrix.

To pull things together, our method for finding a solution to a one-shot game is first to eliminate dominated strategies and second to associate the solution with any dominant strategy that remains, if one exists.

Latest technology based Microeconomics Online Tutoring Assistance

Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Microeconomics help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Microeconomics, project ideas and tutorials. We provide email based Microeconomics help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Microeconomics Homework help and assignment help services. They use their experience, as they have solved thousands of the Microeconomics assignments, which may help you to solve your complex issues of Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.

©TutorsGlobe All rights reserved 2022-2023.