In the context of game theory and oligopoly profit, what is the event called when agents in a game form an agreement about which strategies to implement?

• A. Nash Equilibrium
• B. Collusion
• C. Dominant Strategy
• D. Price Discrimination

Answer: (B)

Verified step by step guidance

1. Understand the context: In game theory, especially in oligopoly markets, firms (agents) choose strategies to maximize their profits while considering the actions of competitors.
2. Identify the concept: When agents independently choose strategies where no one can benefit by changing their own strategy unilaterally, this is called a Nash Equilibrium.
3. Recognize the event where agents cooperate: If agents form an agreement to coordinate their strategies to increase their joint profits, this is known as collusion.
4. Differentiate from other terms: Dominant strategy refers to a strategy that is best regardless of what others do, and price discrimination is a pricing strategy, not an agreement between agents.
5. Conclude that the event where agents agree on strategies to implement is called collusion.