Newfoundland's fishing industry has recently declined sharply due to overfishing, even though fishing companies were supposedly bound by a quota agreement. If all fishermen had abided by the agreement, yields could have been maintained at high levels.

Model this situation as a prisoner's dilemma in which the players are Company A and Company B, and the strategies are to keep the quota and break the quota.Suppose that if both companies keep the quota, then each receives a payoff of $100, and if both break the quota, then each receives a payoff of $0.On the other hand, if one company breaks the quota and the other keeps the quota, then the company that breaks the quota receives a payoff of $150, and the company that keeps the quota receives a payoff of -$50.

What are A and B's payoffs if

A and B keep quota

A break quota and B keep quota

A keep quota and B break quota

A and B break quota

What is the dominant strategy for both A and B? 1, 2 or 3 below

1. Break the quota

2.Keep the quota

3.Neither company has a dominant strategy

In equilibrium, what is each company's payoff? 1, 2, 3 or 4 below

1. A will receive a payoff of $150, and B will receive a payoff of -$50
2. Each company will receive a payoff of $0
3. Company B will receive a payoff of $150, and Company A will receive a payoff of -$50
4. Each company will receive a payoff of $100

Relative to the equilibrium outcome, both companies would be better off if they (1 or 2 below)

1. both broke the quota
2. both kept the quota