The market for bagels contains two firms: BagelWorld (BW) and Bagels'R'Us (BRU) . The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars) depends on whether they abide by the agreement or cheat on the agreement.
Is this game a prisoner's dilemma?
A) No, because cheating yields the highest payoff for both firms
B) Yes, because if both firms played their dominated strategy, they each would earn a higher payoff than when they both play their dominant strategy.
C) Yes, because if both firms played their dominant strategy, they each would earn a higher payoff than when they both play their dominated strategy.
D) No, because neither firm has a dominant strategy
Correct Answer:
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