CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Which of the following statements provides the best description of Nash equilibrium of two firms in the game of prisoners' dilemma?
A. One firm complies and the other cheats.
B. Both firms comply and each firm makes a positive economic profit.
C. Both firms cheat and each firm makes zero economic profit.
Explanation: Both firms realize that compliance results in an economic loss whereas cheating results in zero economic profit. Since zero economic profit is better than an economic loss, both firms cheat.

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