A collusive agreement between two duopolists is similar to the prisoners' dilemma because in both games
A) each player's strategy depends on what the other player does.
B) the Nash equilibrium is not the best outcome for the players.
C) the best outcome is always achieved.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

In both a collusive agreement between two duopolists and the prisoners' dilemma, the Nash equilibrium (where each player chooses their best strategy given the strategies of the others) is not the best outcome for the players. This is because cooperating (or colluding in the case of duopolists) would lead to a better outcome for both, but the incentive to defect (or cheat on the collusion) leads to a worse outcome for both.

A Collusive Agreement Between Two Duopolists Is Similar to the Prisoners