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Chapter 10: Q.12 (page 252)

Does each individual in a prisoner’s dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.

Short Answer

Expert verified

Yes, each individual in a prisoner's dilemma benefits more from cooperation rather than from pursuing self-interest.

Step by step solution

01

Step 1. Definition

The prisoner's dilemma is a situation in game theory when the benefits or payoffs from cooperation are greater than the gains from pursuing self-interest.

02

Step 2. Explanation

Consider two criminals are captured and questioned separately. If neither of them testifies against the other, they will serve a prison term. If one of them testifies against the other, the person who testifies will receive a lesser punishment while the other will receive a greater sentence. suppose they both testify against each other, they will both receive the maximum penalty. The greatest benefit or reward is obtained when both parties collaborate and do not testify against each other, rather than when they both act in their own self-interest and testify against each other.

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Most popular questions from this chapter

Mary and Raj are the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the corn. If they work independently, they will each earn \(100. If they decide to work together and both lower their output, they can each earn \)150. If one person lowers output and the other does not, the person who lowers output will earn \(0and the other person will capture the entire market and will earn \)200. Table 10.6represents the choices available to Mary and Raj. What is the best choice for Raj if he is sure that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoner’s dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output. (Each results entry lists Raj’s earnings first, and Mary's earnings second.)

RAJ MARY
(A) (B)
(\(100,\)100) (\(200,\)0)
(\(0,\)200) (\(150,\)150)

Jane and Bill are apprehended for a bank robbery. They are taken into separate rooms and questioned by the police about their involvement in the crime. The police tell them each that if they confess and turn the other person in, they will receive a lighter sentence. If they both confess, they will be each be sentenced to 30years. If neither confesses, they will each receive a 20-year sentence. If only one confesses, the confessor will receive data-custom-editor="chemistry" 15years and the one who stayed silent will receive 35years. Table 10.7below represents the choices available to Jane and Bill. If Jane trusts Bill to stay silent, what should she do? If Jane thinks that Bill will confess, what should she do? Does Jane have a dominant strategy? Does Bill have a dominant strategy? A = Confess; B = Stay Silent. (Each results entry lists Jane’s sentence first (in years), and Bill's sentence second.)

Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different products? Explain your reasoning.

Continuing with the scenario in question 1, in the long run, the positive economic profits that the monopolistic

competitor earns will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels?

Would you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, “What is the right amount of variety? Can there be too many varieties of shoes, for example?”
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