Question

We know that the one-shot prisoner’s dilemma game results in a dominant Nash equilibrium strategy that is Pareto inefficient. Suppose we allow the two prisoners to retaliate after their respective prison terms. Formally, what aspect of the game would this affect? Could a Pareto efficient outcome result?

Answer 1

In the prisoner's dilemma one shot game, the game results in dominant nash equilibrium strategy I.e. confess, confess which is pareto inefficient because both the prisoners could be better off by not confessing on each other and would have been set free

If we allow the prisoners to retaliate after their respective terms, it would become a infinite sum game as if one them confessed, the other one would revenge after his term is completed and confess again. So they should mutually cooperate and not confess on each other which will lead to a. Pareto outcome

optimal outcome