Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.
-Refer to Figure 17-5. In what sense is the game involving ABC and QRS similar to the prisoners' dilemma game involving Bonnie and Clyde?

Question

Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. 
-Refer to Figure 17-5. In what sense is the game involving ABC and QRS similar to the prisoners' dilemma game involving Bonnie and Clyde?

Quizplus · Accepted Answer

In both games, a dominant strategy can be identified for each player. In the case of ABC and QRS, each company has a dominant strategy of charging a low price regardless of what the other company does. Similarly, in the prisoners' dilemma game, each prisoner has a dominant strategy of confessing regardless of what the other prisoner does.