The prisoner's dilemma refers to a situation in which:
A) the pursuit of individual interests leads to illegal actions.
B) the pursuit of individual interests leads to an outcome that is in the best interest of no one.
C) firms are forced into illegal activities for the good of the group.
D) cheating is the only profitable strategy.

Question

Quizplus · Accepted Answer

The prisoner's dilemma is a classic game theory example where two individuals pursuing their own self-interests results in a suboptimal outcome for both parties. In this scenario, both parties are better off cooperating and working together, but the fear of being taken advantage of by the other party leads to both parties defecting and engaging in non-cooperative behavior. Ultimately, this results in a mutually unsatisfactory outcome for both parties. Choice A is incorrect because the prisoner's dilemma does not inherently involve illegal activities. Choice C is incorrect because the prisoner's dilemma refers to individual decision-making, not group decision-making. Choice D is incorrect because in the prisoner's dilemma, both parties cheating results in a worse outcome for both parties compared to cooperating.

The Prisoner's Dilemma Refers to a Situation in Which