Background: Pablo Escobar calls a meeting with all local kingpins to urge them to form a coalition. Escobar offers to retain control of day-to-day activities. The other kingpins provide funding while receiving profits and security.
Question: How do you call such formal collusive behavior? Explain the reasons why Escobar and other kingpins agreed to market sharing.
Categories: Microeconomics, industrial organization, game theory
Concepts: Cartel, monopoly.
Background: After one gang violated another territory, the two gangs discussed their exclusive territory and agreed not to deal drugs on each other territory.
Question 1: Why do gangs want the exclusive right to sell in a defined territory, and why is it so complicated for them to stick to their agreement?
Question 2: Create a payoff matrix to explain why it is potentially profitable for gangs to form a cartel and why, if they do, they also have an incentive to break the cartel.
Background: Mia and Niklas discuss Jasper’s situation. He must work ridiculously long hours to access his experimental treatment for his Huntington’s Disease. They also discuss the cost of such a treatment for other patients.
Question: Why are drugs for rare and lethal diseases often very expensive? Discuss the economic mechanisms that aggravate the problem.
Background: Many young teenagers dream of becoming soccer stars. However, very few have the chance to even try. To become professional soccer players, young teenagers must join a development academy. Still, very few spots are available, and only the most talented are selected, which creates extreme competition between the teenagers and adds additional pressure on them.
Question: Describe the competitive process among teenagers willing to join development academies.
