Question

Marta and Ramon are the only two growers who provide organically grown strawberries to a local grocery store. They know that if they cooperated and produced less strawberries, they could raise the price of the strawberries. If they work independently (or cheat), they will each earn $100. If they decide to work together and both lower their output, they can each earn $150. 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 below represents the choices available to Marta and Ramon

MARTA Cheat ($100; $100) ($0; $200) Cooperate ($ 200; $0) ($150; $150) Cheat Cooperate RAMON

If Ramon knows for sure that Marta will cooperate, Ramon should   ["cheat" or "cooperate"], if Marta thinks Ramon will cheat, Marta should ["cheat"or "cooperate"] . Hence, the prisoner's dilemma predicts that both will["cheat" or "cooperate"],even though the preferred outcome to both of them is ["cooperate, cooperate" or "cheat, cheat"]         .  

Answer 1

If Ramon knows for sure that Marta will cooperate, Ramon should ["cheat" ], because cheating will give payoff of $200 while corporate will give payoff of 150 dollars.

if Marta thinks Ramon will cheat, Marta should ["cheat"] . Because cheating will give him pay off of $100 while corporate will give payoff of$0.

Hence, the prisoner's dilemma predicts that both will["cheat" ],

even though the preferred outcome to both of them is ["cooperate, cooperate" ]

Prisoner's dilemma predicts that both will cheat, even though a preferred outcome is both co-operate. Because if both of them cooperates then, both of them will have a payoff of 150 dollars, while both of them cheating gives payoff of $100 each.