How does the prisoners dilemma game apply to real-life situations?
The prisoner's dilemma is a standard game in the game theory explaining that why two rational individuals/entity/players might not cooperate even if it appears to be beneficial to cooperate.
A similar situation occurs in our day to day life. Let's take two examples one of Two gas station in a locality and Farmers.
Two gas station: In this case, it is easiler to collude and earn extra profits than to compete. But if there is high incentives to breach like the case happened with OECD collusion.
Farmers: In this case number of farmers are high and even profit margin is not high. SO, a farmer has high incentives to breach the collusion (if made).
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