Rice-to-Riches and Rice Pudding Palace are two shops of similar size that sell rice pudding desserts. Both shops frequently offer "Buy One, Get One Free" specials in an attempt to steal the other store's customers. But because both shops offer the same deal, they both end up earning less profit. This type of situation is BEST described as a _____ game.

Question

Quizplus · Accepted Answer

The situation described is best characterized as a prisoner's dilemma because both shops are in a scenario where, despite having a strategy that could potentially benefit them both (not engaging in constant promotions), they opt for a competitive approach (offering "Buy One, Get One Free" deals) that ultimately leaves them both worse off. This mirrors the prisoner's dilemma in game theory, where two parties choose strategies that lead to suboptimal outcomes for both due to a lack of cooperation.

Rice-To-Riches and Rice Pudding Palace Are Two Shops of Similar