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Answer to Question #5805 in Microeconomics for erum

Question #5805
explain with the help of example the unwillingness of people to participate in fair games?
Expert's answer
People are generally unwilling to play fair games. There may be a few exceptions: when very small amounts of money are at stake, when there is utility derived from the actual play of the game.
Game theory suggests that cartels are inherently unstable, as the behavior of members of a cartel is an example of a prisoner's dilemma. Each member of a cartel would be able to make more profit by breaking the agreement (producing a greater quantity or selling at a lower price
than that agreed) than it could make by abiding by it. However, if all members
break the agreement, all will be worse off.
The incentive to cheat explains why cartels are generally difficult to sustain in
the long run. Empirical studies of 20th century cartels have determined that the
mean duration of discovered cartels is from 5 to 8 years. However, one private
cartel operated peacefully for 134 years before disbanding.[7] There is a danger that once a cartel is broken, the incentives to form the cartel
return and the cartel may be re-formed.

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