Scenario: You are playing a game of "Friend or Foe?" You and your classmate are taken to two different rooms and asked to choose whether the other is a friend or foe. You are told that if both of you choose "friend," you will get $10 each. However, if both of you choose "foe," neither of you will get anything. If one of you chooses "friend" while the other chooses "foe," the one who chooses "foe" will get $20, while the one who chooses "friend" will get nothing.
-Refer to the scenario above.If there is fairness penalty of $12,________.

Question

Quizplus · Accepted Answer

With a fairness penalty of $12, choosing "foe" while the other chooses "friend" becomes less appealing because the $20 reward would be reduced by the penalty, leaving the betrayer with only $8 ($20 - $12 = $8), which is less than the $10 each would receive for mutual cooperation. Therefore, both players are incentivized to choose "friend" to maximize their individual gains without incurring the penalty.

Scenario: You Are Playing a Game of "Friend or Foe