Economics · Game Theory
In the Prisoner's Dilemma, which of the following statements is CORRECT regarding the relationship between Nash Equilibrium and Pareto Optimality?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(Defect, Defect) is Pareto optimal because it is the equilibrium outcome
- 2(Cooperate, Cooperate) is the unique Nash Equilibrium in the one-shot game
- 3The outcome (Cooperate, Cooperate) is Pareto superior to (Defect, Defect) but is not a Nash Equilibrium✓
- 4The Nash Equilibrium (Defect, Defect) is both Nash and Pareto optimal
Correct answer
The outcome (Cooperate, Cooperate) is Pareto superior to (Defect, Defect) but is not a Nash Equilibrium
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