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Prisoner's Dilemma Game

In: Business and Management

Submitted By MiguelM
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Your Name 07/07/14 –Economics
Unit 3 Prisoner’s Dilemma/ Part 1 1. What is a prisoner’s dilemma game?
The Prisoner’s Dilemma is the best-known game of strategy in Social Science. It help us understand what governs the balance between cooperation and competition in business. 2. What is a dominant strategy?
If a strictly dominant strategy exists for one player in a game, that player will play that strategy in each of the game's Nash equilibrium. If both players have a strictly dominant strategy, the game has only one unique Nash equilibrium. 3. What is a cartel?
A cartel is a collection of businesses or countries that act together as a single producer and agree to influence prices for certain goods and services by controlling production and marketing.

4. What is Nash equilibrium?
(In economics and game theory) a stable state of a system involving the interaction of different participants, in which no participant can gain by a unilateral change of strategy if the strategies of the others remain unchanged

Part 2 – Standard Example

| Clyde confesses | Clyde is silent | Bonnie confesses | Both get 10 years. | Bonnie-6 months/Clyde gets 20 years. | Bonnie is silent | Clyde gets 6 months, Bonnie is charged 20 years. | Both get a year. |

1. What is the equilibrium in this game?
The equilibrium in this game would be the participation on an agreement between both of the participants, but due to a case of dishonesty, one participant can take advantage over the other. 2. How can Bonnie and Clyde both be better off?
They both would be fairly better off to stay silent throughout the interrogations to achieve a fair outcome between the two allies.

3. Explain the following strategies that can be used to arrive at the better outcome: * Grim trigger: In game theory, grim trigger is a trigger strategy for a repeated

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