If two firms that form a cartel agreement are in a prisoner's dilemma game, then
A)both firms will have an incentive to break the agreement.
B)only one firm will have an incentive to break the agreement.
C)both firms will be better off if they hold to the agreement than if they break it.
D)a and c
E)b and c

Question

Quizplus · Accepted Answer

In a prisoner's dilemma game, both firms have an incentive to break the agreement to maximize their individual payoffs (A), but if both could trust each other and stick to the agreement, they would collectively be better off than if they both defect (C).

If Two Firms That Form a Cartel Agreement Are in a Prisoner's