Which of the following is a potential outcome of the prisoner’s dilemma? A. Collusion B. Nash equilibrium C. Perfect competition D. Monopolistic competition
The correct answer and explanation is:
Correct Answer: B. Nash equilibrium
Explanation:
The Prisoner’s Dilemma is a fundamental concept in game theory that illustrates why two rational individuals might not cooperate, even if it appears to be in their best interest to do so. In the classic setup, two suspects are arrested and interrogated separately. Each has the option to either cooperate with the other by remaining silent or defect by betraying the other.
Here’s the catch:
- If both prisoners remain silent (cooperate), they get light sentences.
- If one defects and the other cooperates, the defector goes free while the cooperator gets a heavy sentence.
- If both defect, they each get a moderate sentence.
From a rational standpoint, both prisoners will likely choose to defect, because this minimizes the worst-case scenario for each, regardless of what the other does. This leads to a Nash equilibrium—a situation in which no player can improve their outcome by unilaterally changing their strategy, assuming the other player’s strategy remains the same.
In the context of the Prisoner’s Dilemma, Nash equilibrium occurs when both players choose to defect, because:
- Neither has anything to gain by changing their choice alone.
- This choice is stable but not optimal; both would be better off if they had cooperated, but trust and communication are lacking.
Let’s examine the other choices:
- A. Collusion is possible in repeated games but not a typical outcome in a one-shot Prisoner’s Dilemma.
- C. Perfect competition and D. Monopolistic competition are market structures, not strategic game outcomes.
Therefore, the most accurate and theoretically grounded answer is B. Nash equilibrium, as it directly reflects the stable strategy outcome of the Prisoner’s Dilemma.