Consider the payoffs in a symmetric Prisoner\'s Dilemma game, where players can

Question

Consider the payoffs in a symmetric Prisoner's Dilemma game, where players can choose between existCexist (cooperate) and existDexist (defect). In a prisoner's dilemma game the payoffs can be ranked existT > R > P > Sexist. The matrix below shows the payoffs to the row player: Which of the following statements is correct? The outcome (C, C) cannot be achieved through contracting with limited verifiability Under limited verifiability, there is a transfer that will make the outcome (C, C) the Nash equilibrium of the game induced by the transfer. (D, D) is the unique efficient outcome of this game. There is no contract that will lead players to (rationally) choose the outcome (C, C) (C, C) is the unique efficient outcome of this game.

Explanation / Answer

In a prisioners dilema both the players want to either maximise thier gains ( for player B) or minimise their losses ( for player A) , So using Dominance as T&P both are greater than S&R first row gets rulled off. Also as S&P are both less than R&P the first column gets rulled off. So, what remains as the only rational stratergy is DD with payoff as P

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