The decision by the federal government to prohibit cigarette companies from advertising on television actually caused the companies' profits to increase,an outcome that is consistent with the prediction of the prisoner's dilemma game.

Question

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The decision to prohibit cigarette companies from advertising on television created a situation where all the companies faced the same constraint. This eliminated the advertising advantage any one company might have had over the others. As a result, the companies were forced to compete solely on the basis of the quality and price of their products. This situation, consistent with the prisoner's dilemma game, gave the companies an incentive to increase profits by raising prices rather than by advertising more aggressively. Ultimately, this led to an increase in profits for the companies.

The Decision by the Federal Government to Prohibit Cigarette Companies