Niceville, Ohio, Only Has Two Dentists, While the Surrounding Communities

question 21

Essay

Niceville, Ohio, only has two dentists, while the surrounding communities have many more on a per capita basis. The demand for dental services is such that these two dentists could agree to raise their prices (they play golf together every Saturday) and earn economic profit. Instead, they choose to price competitively and earn what other dentists earn. What might explain this?

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Definitions:

Thinking

The process of considering or reasoning about something; the intellect's action of forming opinions, judgments, or plans.

Payoff Table

A decision analysis tool that summarizes the outcomes of different decisions in various states of nature, typically showing the payoff or loss for each combination of decision and state.

EMV Decision

A strategic choice made by calculating and comparing the expected monetary values of different options or paths.

Prior Probabilities

The probabilities initially assigned to hypotheses or events based on background knowledge before new data is taken into account.