Chapter 17 discussed the market structure oligopoly, in which there are only a few sellers that offer similar or identical products. A main characteristic of an oligopoly is the tension between cooperation and self interest. The profit maximization (characteristic of a monopoly) can be achieved through a collusion, but it is almost impossible to uphold/create due to dominant strategy/disagreements in production levels. Thus an oligopoly operates at levels in-between those of a monopoly and perfectly competitive market.
I thought the idea of prisoner's dilemma was really interesting and how there is always a dominant strategy; especially when they related it to the arms race and common resources (it all makes sense now). I think Mankiw did a fantastic job relating this to oligopolies.
Some questions:
1.) Why are there antitrust laws that prohibit explicit agreements among oligopolists as a matter of public policy? (I know it would be like a monopoly, in that it maximizes profits, and therefore is socially inefficient...but then OPEC is legal; what are the exceptions?) Perhaps this is later in the chapter
2.) What is the difference between dominant strategy and game theory?
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