Question

In a "one-shot" game, businesses may be tempted to maximize profit at the expense of a consumer. Most of us have been victimized by a version of this behavior at some point in our lives. Describe the circumstances of an example that you have witnessed. Why would a firm engage in that sort of behavior? As a consumer, how would you protect yourself from exploitation?

Answer 1

In a one shot game we suppose that there are only two producers for a commodity. For making profit both of the producers simultaneously makes the strategies.

For an example there are two firms which produce good A. They make simultaneously a strategy for fix the price that makes profit for them. Then the consumers forced to buy the good A at a higher price.

The firms makes the one shot game for making profit. Because there are only two producers for a commodity. So when a producer independently fix higher prices. Then the consumers prefer the producer which is relatively cheaper. So the producer who fix higher price face loss. And his rivalry producer makes profit due to relatively less price with more consumers. So both of the producers makes the price decision simultaneously for making profit. Both of them makes the price simultaneously which gives both of them profit.

A consumer can protect him from this type of exploitation by different ways. The first way is to making alternative goods which is relatively cheaper. The choice of alternative goods force the producers to fix price at a low level. Another way is the bargaining power. The consumer choose his bargaining power for reducing price. But the bargaining way is relatively less effective. Because the producers have large number of buyers. The political pressure and the associations made by the consumers have a strong bargaining power.