Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 17 - Part V - Oligopoly - Questions for Review - Page 366: 6

Answer

One example of the prisoner's dilemma to help explain behavior is that of an arms race. If neither side arms, both sides are safe. If both sides arm, both sides are at risk. However, if one side arms and the other doesn't, the arming side is safe while the non-arming side is weak. In this case, both sides should choose the same option.

Work Step by Step

Another example of the prisoner's dilemma to help explain behavior is that of cheating on an exam. If neither person cheats, then they both get the same grade. If both people cheat, they get a much higher grade. However if one person cheats and the other doesn't, then the cheater will get a score the same as if both people cheat and the non-cheater will have the same score as if both people don't cheat. In this case, both sides should choose the same option.
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