What is the prisoner's dilemma?
A) the game that demonstrates the basic problem that noncolluding oligopolists face
B) a theory on how the monopolist charges prices above the market equilibrium
C) the competition that can occur among firms in monopolistic competition
D) a theory about why firms break the law by colluding

Question

Quizplus · Accepted Answer

The prisoner's dilemma is a game theory concept that demonstrates the problem that non-colluding oligopolists face. It shows that although cooperation would be beneficial for all firms, each firm has an incentive to cheat and act in its self-interest, which can lead to a worse outcome for everyone. Therefore, the best strategy in this situation is to act in one's self-interest, even though it may lead to a negative outcome for the group as a whole.

What Is the Prisoner's Dilemma