The prisoners' dilemma is similar to the problem faced by firms in an oligopoly in the United States because
A) mutual interdependence exists, and collusion is illegal in the United States, so the firms cannot legally communicate.
B) collusion is legal in the United States, and firms can communicate their pricing decisions to each other.
C) failure to cooperate leads to better outcomes than cooperation.
D) private prisons are run by oligopolies.
E) the firms can communicate but mutual interdependence exists.

Question

Quizplus · Accepted Answer

Both situations involve mutual interdependence, where the actions of one player/firm affect the outcomes for the others. In both cases, cooperation and collusion would lead to better outcomes for all parties involved. However, in the US, collusion is illegal for firms, just as communication between prisoners is illegal in the prisoners' dilemma. Therefore, both situations involve a tension between individual self-interest and collective well-being.

The Prisoners' Dilemma Is Similar to the Problem Faced by Firms