Economics Oligopoly Questions
The prisoner's dilemma is a concept in game theory that illustrates a situation where two individuals, who are arrested and held in separate cells, have to decide whether to cooperate with each other or betray each other. The dilemma arises because each prisoner must choose between staying silent (cooperating) or confessing (betraying) their partner. The outcome of their decision depends on the choices made by both prisoners. If both prisoners stay silent, they both receive a moderate sentence. If both prisoners confess, they both receive a harsh sentence. However, if one prisoner stays silent while the other confesses, the one who confesses receives a reduced sentence while the other receives a severe sentence. The prisoner's dilemma highlights the conflict between individual self-interest and mutual cooperation, demonstrating that in certain situations, individuals may choose to betray each other even though cooperation would lead to a better overall outcome.