Question
Firm X and Firm Y both face the decision of whether to invest in a new process. Games 1, 2, and 3 show how
Firm X and Firm Y both face the decision of whether to invest in a new process. Games 1, 2, and 3 show how their profits depend on the combination of decisions they make under three different scenarios. Which of the three games is a prisoner's dilemma? Game 1: Firm Y Don't invest Firm X Don't invest 4 for each Invest 2 for X 10 for Y Invest 10 for X 2 for Y 8 for each Game 2: Firm Y Don't invest Invest Don't 10 for X 4 for each Firm X invest 2 for Y 8 for each 2 for X Invest 10 for Y Game 3: Don't invest Invest Don't 8 for each 2 for X Firm X invest 10 for Y Invest 10 for X 2 for Y 4 for each Games 1, 2, and 3 O Game 1 and 3 only O Game 2 and 3 only Games 1 and 2 only
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