Scenario: Roger and Billy are two colleagues who were caught by their boss for forging an important document together and have been taken to separate rooms for interrogation. They are told that if both of them confess their crime, they will be charged a fine of $2,000. If neither of them confesses, they will be fined $1,000 each. However, if one of them confesses while the other does not, the one who confesses will be set free but the other will be fined $3,000.
-Refer to the scenario above.In equilibrium,________.

Question

Quizplus · Accepted Answer

This scenario is a classic example of the Prisoner's Dilemma, a fundamental concept in game theory. In equilibrium, both parties will choose to confess because it is their dominant strategy. Confessing minimizes the potential maximum loss they could face, as not confessing could result in a $3,000 fine if the other confesses.

Scenario: Roger and Billy Are Two Colleagues Who Were Caught