Why is the "prisoners' dilemma" a good model of experience goods markets with no signaling of commitments?
A)Because it can be likened to a win-lose game
B)Because this is a two-person game with clearly defined options, as in the prisoners' situation
C)Because the producer cannot communicate true quality at the time of buying and the customer cannot work out true quality until after buying, a low quality solution minimizes risks in this low-trust situation
D)Because both are in a closed situation where they have an obligation to make a deal

Question

Quizplus · Accepted Answer

In experience goods markets, the true quality of a product is only known after purchase. Without signaling, producers may opt for lower quality to minimize risk, similar to the prisoners' dilemma where both parties choose self-interest over cooperation due to lack of trust.

Why Is the "Prisoners' Dilemma" a Good Model of Experience