Question

Which of the following is an example of a way in which a firm in oligopoly can escape the prisoners' dilemma?

1) Colluding with other firms to set high prices
2) Engaging in predatory pricing to drive competitors out of the market
3) Investing in research and development to create innovative products
4) Engaging in price wars to gain market share

Answer 1

Investing in research and development to create innovative products

Step-by-step explanation:

An example of a way in which a firm in oligopoly can escape the prisoners' dilemma is by investing in research and development to create innovative products. By creating unique and innovative products, a firm can differentiate itself from its competitors and gain a competitive advantage. This allows the firm to attract customers and maintain high profits without engaging in price competition.