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 $0 and the other person will capture the entire
market and will earn $200. Table 10.6 represents 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.)
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