Question

1.

A Prisoners Dilemma illustrates the fact that

	a.	​Rational choices can lead to inefficient outcomes
	b.	​Rational choices always leads to good outcomes
	c.	​Rational choices always lead to inefficient outcomes
	d.	​None of the above

2.

Two roommates John and Joe are playing a simultaneous game of cleaning the apartment. If neither of them clean, the apartment gets filthy and both get a utility of 2. If John cleans and Joe doesn’t, John gets a utility of 1 and Joe gets a utility of 4. If Joe cleans and John doesn’t, Joe gets a utility of 1 and John gets a utility of 4 and if both clean up the apartment, they each get a utility of 3.

​ If the roommates played the game repeatedly where one roommate not cleaning this time would trigger the other roommate not cleaning next time, the Nash equilibrium is most likely to be

	a.	​Joe cleans, John doesn’t
	b.	​Both of them clean
	c.	​Neither of them clean
	d.	​John cleans, Joe doesn’t

3.

Nash equilibrium is:

	a.	​where the outcome is always efficient
	b.	​when each player’s strategy is the best response to the other player’s strategy
	c.	​where one player maximizes his payoff and the other doesn’t
	d.	​difficult to determine

Answer 1

SOL.:

OPTION (A) IS CORRECT

​Rational choices can lead to inefficient outcomes

The Prisoner's Dilemma states that how rivals could act to their disadvantage.

Option (c) and (b) is incorrect because rational choices not always lead to inefficient or good outcoms but can lead to inefficient or good outcoms.

FOR EXAMPLE

The following depicts the Prisoner's Dilemma

Two criminals are arrested after committing a murder but the evidences are not sufficient to make a murder charge unless one or both criminal confess.

They have the following choices :

1. If both confess , each will go to jail for 50 years.
2. If both do bot confess , both will go free.
3. If one confess then he gets no punishment and the other suspect gets life time imprisonment.