In an oligopoly market characterized by a kinked demand curve, how does the prisoner's dilemma affect firms' pricing strategies when one firm considers lowering its price?

In an oligopoly, a few firms dominate the market, and their decisions greatly affect each other. The kinked demand curve shows that if one firm lowers its price, others will quickly follow to avoid losing customers, leading to little change in overall sales. This situation creates a prisoner's dilemma because each firm wants to lower prices to attract more customers, but if all firms do this, they end up with lower profits. For example, if Firm A cuts its price, Firm B might do the same to keep its customers, resulting in both firms earning less. Therefore, firms often avoid lowering prices and may prefer to maintain their current prices, even if they think lowering them could be beneficial.