Explanation The examples of how the prisoner’s dilemma explains behavior is arms race and common resources. In the case of arms race, during the time of World War II, the United States and Soviet Union engaged in competition over military power. This event motivated some of the early work due to the formation of game theory . The game theorists noted that an arms race is just like the concept of prisoners' dilemma. If both the countries dis-arms of existing weapon factory, then none of the country threats other country. If both the countries build the new weapon factory, then one country can protect itself from the other country...

How prisoner’s dilemma helps to explain a behavior.

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Definition Definition Economic decision-making framework that analyzes how different players optimize their outcomes with given pay-offs corresponding to their available strategies. The assumptions of game theory are: The number of players or competitors are finite/limited; All participants are rational The rules of the game are known to every player; and Each participant has a finite set of actions. A common way in which game theory is presented as an ( m x n ) matrix in which m represents the strategies of row player and n represents the strategies of column player. There are several limitations of game theory: Many businesses have a large number of competitors, and selecting an optimal strategy in these circumstances is difficult; Real-life business operating environments are full of uncertainty and difficult to model as a game theory; and The assumption of rationality and utility maximization isn't always an accurate portrayal of human nature.

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