Final answer:
The statement is false; in an uncoordinated supply chain, stages operating independently can lead to inefficiencies, known as the bullwhip effect, resulting in higher costs and reduced profits for the whole supply chain, akin to a prisoner's dilemma situation.
Step-by-step explanation:
The statement that with an uncoordinated supply chain, each stage tries to maximize its own profits, resulting in actions that often increase total supply chain surplus is false. In a supply chain where each stage operates independently aiming to maximize its own profits, the overall efficiency is compromised, leading to the bullwhip effect. This lack of coordination can result in overstocking, stockouts, and ultimately higher costs and smaller profit margins for the entire supply chain.
When inflation is high and variable, the ability to adjust to price changes is suppressed, leading to erratic market adjustments and a propensity for surpluses and shortages. Similarly, in the case of uncoordinated supply chain operations, each entity trying to optimize its individual profits may lead to all parties, such as Firm A and Firm B in the given example, making decisions that are suboptimal at the collective level.
Instead, if each stage of the supply chain worked together, they could aim for a lower combined output, maximizing profits as a whole, like a monopolist would. This is akin to a prisoner's dilemma, where individual rational decisions can lead to collectively irrational outcomes.