Consider an Example of the Prisoner's Dilemma Where 2 Firms

question 104

Multiple Choice

Consider an example of the prisoner's dilemma where 2 firms are making sealed bids on a highway- construction contract and each firm is allowed to bid either $100 million or $120 million. If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the contract and receives the full value of its bid (and the other bidder earns zero) . The cooperative outcome in this situation is

• A) both firms bid $100 million.
• B) both firms bid $120 million.
• C) both firms bid $50 million.
• D) one firm bids $100 million, the other firm bids $120 million.
• E) both firms bid $60 million.

---

Definitions:

Taxes

Mandatory monetary payments or different forms of assessments levied on taxpayers by government bodies to support government expenditures and a range of public spending.

Legal Immigrants

Individuals who have been authorized by a country to live and work there permanently or for a specified period.

Demand for Labor

The quantity of workers that employers are willing and able to hire at given wages over a specific time period, reflecting the need for labor to produce goods and services.

Inelastic

Inelastic describes a situation where the demand or supply of a good or service is relatively unresponsive to changes in price.