This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not. According to the matrix shown,the profit-maximizing outcome for the firms is:

Question

This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not.  According to the matrix shown,the profit-maximizing outcome for the firms is:

Quizplus · Accepted Answer

The highest payoff for both firms is achieved when they collude and act like a monopolist, resulting in a joint profit of $600 million. If either firm chooses to compete while the other colludes, the competing firm will earn a lower payoff of $150 million, while the colluding firm will earn only $50 million. Therefore, both firms have an incentive to collude and choose the mutually beneficial outcome.

This Prisoner's Dilemma Game Shows the Payoffs Associated with Two