9. In the end two firms control the Toad ladder market, and are considering whether to maintain their collusive agreement and higher price or whether to cheat on each other. Each thinks their profit if they continue to honour the agreement will be $5000 a week, but only $1000 if they get cheated on. If they cheat, but the other firm doesn’t, their profit will be $10,000, but only $3000 if they both cheat. What will they do? Explain

Answer rating: 100% (QA)

This scenario demonstrates a classic example of the Prisoners Dilemma in game theoryBoth firms face a situation where Cooperation maintain agreement G... View the full answer