least some oligopolists give in to this temptation and start producing more, then the market price will fall. A

small handful of oligopoly firms may end up competing so fiercely that they all find themselves earning zero

economic profits—as if they were perfect competitors.

The Prisoner’s Dilemma

Because of the complexity of oligopoly, which is the result of mutual interdependence among firms, there is no

single, generally-accepted theory of how oligopolies behave, in the same way that we have theories for all the

other market structures. Instead, economists use game theory, a branch of mathematics that analyzes

situations in which players must make decisions and then receive payoffs based on what other players decide

to do. Game theory has found widespread applications in the social sciences, as well as in business, law, and

military strategy.

The prisoner’s dilemma is a scenario in which the gains from cooperation are larger than the rewards from
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