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I don't see the prisoner's dilemma aspect to this. If a hotel lowers their prices considerably, they will probably fill up fast. Some of the other hotels may lo
by scott_s 13y ago
I don't see the prisoner's dilemma aspect to this. If a hotel lowers their prices considerably, they will probably fill up fast. Some of the other hotels may lose some business, and have to lower their prices somewhat, but they will probably not have to lower their prices down to what the "defector" hotel did.
A prisoner's dilemma situation requires good outcome if everyone colludes, and a terrible outcome for all if even a single prisoner defects. I don't see a terrible outcome for all if one hotel greatly reduces their price.
- digikata 13y agoThe "terrible outcome" is that if one hotel defects, more are tempted to defect (defect or allow the defector to capture more of the profits), and if all hotels compete on price, everybody's profit margin is lower. If demand is actually greater than supply, prices rise, but if supply is greater than demand, then the possibility of the price collapsing because of defection is greater.
- scott_s 13y agoMy point was that the period of defection would not last long, because of the high demand; the cheap supply would be gobbled up quick. The hotel prices are the result of organic market forces, not collusion.