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

question 28

Multiple Choice

Consider an example of the prisoner's dilemma where 2 firms are making sealed bids on a contract and each firm is allowed to bid either $100 or $180. 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 $50.
• B) both firms bid $180.
• C) both firms bid $100.
• D) both firms bid $90.
• E) one firm bids $100, the other firm bids $180.

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