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Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460

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BuyFindarrow_forward

Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 26, Problem 16E
Textbook Problem
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Explain why repeated interactions tend to break down the solution of a prisoner’s dilemma. Why does the dilemma go away?

To determine

To explain:

The reason for breakdown of the solution to a prisoner's dilemma and the reasons the dilemma goes away.

Explanation of Solution

In a game theory, prisoners' dilemma is a situation where two prisoners, arrested for a crime, have two strategies-to confess and to not confess.

An example of pay-off matrix showing number of years in prison is shown below:

The Nash equilibrium is found out as follows:

If A chooses to confess, the best response for B is to confess.

If A chooses to not confess, the best response for B is to not confess.

If B chooses to confess, the best response for A is to confess...

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