Final answer:
Coopetition option (a) describes a situation where firms in an oligopoly are both competitors and collaborators, managing outputs and pricing like a monopoly, known as collusion. This dual relationship can lead to a prisoner's dilemma, balancing gains from cooperation against competition incentives.
Step-by-step explanation:
The term that describes a situation where two or more firms are both competitors and collaborators is competition. This concept applies to scenarios where companies in an oligopoly might decide to act together, akin to a monopoly, to regulate the market by controlling outputs and pricing, which is termed collusion.
However, because firms also compete with one another to capture a larger market share, they might end up behaving in ways that resemble a highly competitive market despite occasional cooperation.
This simultaneous competition and collaboration, or being 'frenemies', is a characteristic of oligopolistic markets and can sometimes result in a prisoner's dilemma, where the gains from cooperation are substantial, but the incentive to compete remains strong. In many jurisdictions, such as the European Union and the United States, collusion to manipulate the market is illegal.