Multiple Choice
Based on the information in the payoff matrix, which of the following is true?
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14. Oligopoly
One-Time Games and the Prisoner's Dilemma
Multiple Choice
In the prisoners' dilemma game, self-interest leads to which of the following outcomes?
A
Both players choosing to cooperate, resulting in the best possible outcome for both.
B
Neither player making a decision, resulting in no outcome.
C
One player cooperating and the other defecting, resulting in an optimal outcome for the defector.
D
Both players choosing to defect, resulting in a worse outcome for both compared to cooperation.
Verified step by step guidance1
Understand the setup of the prisoners' dilemma: two players each have two choices—cooperate or defect—and the payoffs depend on the combination of their choices.
Recognize that in the prisoners' dilemma, each player acts in self-interest, aiming to maximize their own payoff without trusting the other player to cooperate.
Analyze the incentives: if one player cooperates, the other player can get a better payoff by defecting; if one defects, the other is better off defecting as well to avoid the worst payoff.
Identify the Nash equilibrium, where neither player can improve their outcome by unilaterally changing their strategy. In this game, it is both players defecting.
Conclude that self-interest leads both players to defect, resulting in a worse outcome for both compared to mutual cooperation, which would have been better but is unstable due to incentives to defect.
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