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Mary and Raj are the only two growers who provide organically grown corn to a local grocery store.They know that if they cooperated and produced less corn, they could raise the price of the corn. If they work independently, they will each earn $\$ 100$ . If they decide to work together and both lower their output, and the other does not, the person who lowers output will earn $\$ 0$ and the other person will capture the entire market and will earn $\$ 200$ . Table 10.6 represents the choices available to Mary and Raj. What is the bestchoice for Raj if he is sure that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoner's dilemma result? What is the preferred choice if they could ensure cooperation? A $=$ Work independently; $\mathrm{B}=$ Cooperate and Lower Output. (Each results entry lists Raj's earnings first, and Mary'searnings second.)

From the payoff matrix shown it can be seen that when M decides to cooperate then the payofffor $R$ is maximum when he decides to cheat i.e. work independently. And if M thinks that R isgoing to cheat then M will have maximum payoff when she cheats as well. So, even though thescenario with maximum total benefit is when they both cooperate but still because cheatingincreases individual benefit while other is at great loss so, led by either greed or fear, both theplayers prefer to cheat which is prisoner's dilemma. The preferred choice when cooperation isensured is $(\mathrm{B}, \mathrm{B})$ which has maximum total gain.

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let's use this table of outcomes to determine what each of these players both Marianne Ra should dio, depending on what they think their partner will dio. Right? So were given this information that Marien Raj are the only two growers who provide core into a local store. Right? And these air their outcomes. Whether so, if they collaborated and both lowered their supply, then they could drive the price up right, so they would both earned 150. Raj is earnings. Our in Red and Mary's are in blue now, if, uh if they both didn't cooperate right, they would have their normal market share of half each right so they could both earned 100 which is a bit less than if they collaborated. But here's where the tricky part comes in. If one of them does choose to lower their output right and the other one doesn't, then the other one will gain the entire share of the market and they will earn 200 while the person who chose to try and cooperate well will earn zero. So let's look at how each of these players will behave knowing each of the conditions right, so if Rodgers sure that Mary will crawl. Cooperate. Right. So Mary is cooperating. What is the best choice for Raj in the situation? Right. So he could either on 1 50 if he cooperates to or he could earn more 200 if he doesn't. So in this case, the best choice for him is to not cooperate, right? Because he can earn 50 more than if you did. Alright. Next we have Mary. Thanks. Raj will cheat, right? So if she thinks Raj will cheat, that's on the second column on the right. Right? So whats Mary's best option in blue? So if she cooperates, she will earn zero right? But if she doesn't cooperate, she can earn 100. So she's also not going to cooperate because she will earn 100 more. And if she did right? So in both cases, if they think that the other will cooperate or that they think the other will cheat, they'll both choose not to cooperate because that is the better outcome for them. So the prisoner's dilemma is that neither, uh, collaborate neither lower output, right? So they'll both earn 100 about the preferred choice. If, um if they, both of them could ensure cooperation, right? The preferred choice would be that they cooperate. Why is that? If both of them were sure that they would cooperate, the preferred to us to be cooperate, right, because they would intern in total earn 300 right, whereas before they would only be earning 200. So if there was a world where they could ensure both of them would cooperate, they could earn the most altogether if they did choose to cooperate. But they will choose in turn not to, because neither could be under percent Sure if they'll will follow on their end of the deal.

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