Chapter 10, Problem 20P

May and Raj me 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 com. If they work independently, they will each earn $\$\text{1}00$.

If they decide to work together and both lower their output, they call each earn $\$\text{15}0$.

If one person lowers output and the other does not, the person who lowers output will earn $1 and the other person will capture the entire market and will earn $\$\text{2}00$.

Table 10.6 represents the choices available to Mary and Raj. What is the best choice for Raj if he is sole 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; B = Cooperate and Lower Output. (Each results entry lists Raj’s earnings first, and Mary’s earnings second.)