In an infinitely repeated prisoner's dilemma (such as a repeated price war):
A) repeated defection is the only equilibrium.
B) there are two different equilibria: repeated defection and repeated cooperation.
C) repeated cooperation is the only equilibrium.
D) each player cooperates in the early stages, but defects near the end of the game.
E) there is no stable equilibrium strategy for either player.

Question

Quizplus · Accepted Answer

In an infinitely repeated prisoner's dilemma, there are two equilibria - repeated defection and repeated cooperation. Players can benefit by cooperating with each other in the beginning to establish mutual trust, and then continue to cooperate as long as their opponent reciprocates. However, if one player defects, the other player may retaliate with defection in the next round, leading to a downward spiral of defection. Therefore, both players must have a credible threat to punish defection, which can sustain cooperation as an equilibrium outcome. This is known as the tit-for-tat strategy.

In an Infinitely Repeated Prisoner's Dilemma (Such as a Repeated