Question

Suppose that Rich and Sheri each own the two largest helicopter tour companies at the Grand Canyon. If each uses a pricing strategy that leads to a prisoner’s dilemma, what would be the result?a) Both Rich and Sheri would earn higher profits.b) Rich and Sheri would be better off by not cooperating with each other.c) Tourists would end up paying a lot more for helicopter tours.d) Tourists would end up receiving great deals for helicopter tours.

Answer 1

D) Tourists would end up receiving great deals for helicopter tours.

Step-by-step explanation:

A prisoner's dilemma is a paradox formulated by Merrill Flood and Melvin Dresher. It refers to a situation where two competing individuals (or businesses) should cooperate in order to obtain the best possible results, but they do not cooperate because they lack incentive to do so.

When competing individuals do not cooperate with each other, other people will benefit. In this case since Rich and Sheri will not cooperate with each other, their customers will benefit. In order to win more clients, Rich may start to lower the price of his tours, and eventually that will force Sheri to lower her prices in order to not lose clients. At the end, their customers will benefit because they will pay lower prices.