Jane and Sam are the only two growers who provide organically grown tomatoes to a local supermarket. They know that if they cooperated and produced less tomatoes, they could raise the price of tomatoes. If they work independently, they will earn $100 each. If they decide to work together and both lower their output, the will earn $150 each. If one person lowers 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. The table above represents the choices available to Jane and Sam. What is the best choice for Sam if he is sure that Jane will cooperate? If Jane thinks Sam will cheat, what should she do and why? What is the prisoner's dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output.
| In the results, Sam's earnings are listed first and Jane's earnings are listed second. | Jane | ||
| A | B | ||
| Sam | A | ($100, $100) | ($200, $0) |
| B | ($0, $200) | ($150, $150) |
Jane and Sam are the only two growers who provide organically grown tomatoes to a local supermarket. They know that if they cooperated and produced less tomatoes, they could raise the price of tomatoes. If they work independently, they will earn $100 each. If they decide to work together and both lower their output, the will earn $150 each. If one person lowers 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. The table above represents the choices available to Jane and Sam. What is the best choice for Sam if he is sure that Jane will cooperate? If Jane thinks Sam will cheat, what should she do and why? What is the prisoner's dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output.
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