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Published in:
2007 | OriginalPaper | Chapter
Infinite Dynamic Games
Published in: Game Theory
Publisher: Springer London
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Consider the following two (related) questions. In the Prisoners’ Dilemma, uncooperative behaviour was the predicted outcome although cooperative behaviour would lead to greater payoffs for all players if
everyone
was cooperative. Interpreting the Prisoners’ Dilemma as a generalised social interaction, we can ask the question: Is external (e.g., governmental) force required in order to sustain cooperation or can such behaviour be induced in a liberal, individually rational way? In the Cournot duopoly, cartels were not stable. However, in many countries, substantial effort is expended in making and enforcing anticollusion laws. So it seems that, in reality, there is a risk of cartel formation. How can cartels be stable?