Laurel and Janet are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $12,000 and the other will earn $2,000. In this version of the prisoners' dilemma, if the game is played only once, Laurel should
A)advertise, but if the game is to be repeated many times she should probably not advertise.
B)advertise, and if the game is to be repeated many times she should still probably advertise.
C)not advertise, but if the game is to be repeated many times she should probably advertise.
D)not advertise, and if the game is to be repeated many times she should still not advertise.

Question

Quizplus · Accepted Answer

In the one-time game, Laurel's best strategy is to advertise. This is because if she doesn't advertise and Janet does, Laurel will only earn $2,000, while if she advertises and Janet doesn't, she will earn $12,000. However, if the game is repeated many times, the best strategy is for both Laurel and Janet to cooperate and not advertise, as this will lead to the highest total profits over time. This is because if one player deviates and advertises while the other doesn't, it will lead to a lower total profit than if both players had cooperated and not advertised.

Laurel and Janet Are Competitors in a Local Market and Each