Uber and Lyft compete over price in the ride-sharing market. They each may choose either a high price or a low price for their services. Based on the payoffs provided in the matrix below, is this situation a prisoner's dilemma?

Question

Uber and Lyft compete over price in the ride-sharing market. They each may choose either a high price or a low price for their services. Based on the payoffs provided in the matrix below, is this situation a​ prisoner's dilemma?

BlackTom AI · Accepted Answer

Both firms have a dominant incentive to choose Low: if Lyft sets High, Uber gets 10 by choosing Low vs 8 by choosing High; if Lyft sets Low, Uber gets 4 by choosing Low vs 2 by choosing High. So Uber’s best response to either Lyft action is Low. By symmetry, Lyft’s best response is also Low (10>8 when Uber plays High; 4>2 when Uber plays Low).

1) Relevant knowledge points and concepts
- Prisoner’s dilemma requires: (a) each player has a dominant strategy that leads them to a noncooperative action, and (b) the payoff from mutual cooperation is higher for both players than the payoff from the mutual noncooperative outcome.
- Dominant strategy: a choice that yields a higher payoff regardless of the opponent’s action.

2) Step-by-step reasoning
- Compare Uber’s payoffs: Against Lyft = High, Uber: High → 8, Low → 10 → prefer Low. Against Lyft = Low, Uber: High → 2, Low → 4 → prefer Low. So Uber’s dominant strategy = Low.
- For Lyft (by symmetry): Against Uber = High, Lyft: High → 8, Low → 10 → prefer Low. Against Uber = Low, Lyft: High → 2, Low → 4 → prefer Low. So Lyft’s dominant strategy = Low.
- When both follow their dominant strategies, the outcome is (Low, Low) → payoffs (Uber 4, Lyft 4).
- Mutual cooperation (both choose High) yields (8, 8), which is strictly better for each than (4, 4).

3) Intermediate calculations shown above (pairwise payoff comparisons for each firm).

4) Why the correct answer is correct
- Each firm’s pursuit of self-interest (choosing its dominant strategy Low) leads to (4,4). But if they cooperated and both chose High, they would each get 8. Thus self-interested behavior leaves them worse off than cooperation — exactly the structure of a prisoner’s dilemma.

5) Why other options are incorrect
- “No, because cooperation leaves Uber and Lyft better off.” This statement is true about payoffs but denies that it’s a PD; in fact that is one criterion of a PD, so “No” is wrong.
- “No, because pursuit of self-interest leaves Uber and Lyft better off.” Incorrect: pursuit of self-interest leaves them worse off (4<8).
- “Yes, because cooperation leaves Uber and Lyft worse off.” Incorrect: cooperation (both High) leaves them better off (8>4).

6) Conclusion
- The situation is a prisoner’s dilemma. The correct choice is: Yes, because pursuit of self-interest leaves Uber and Lyft worse off.

Uber and Lyft compete over price in the ride-sharing market. They each may choose either a high price or a low price for their services. Based on the payoffs provided in the matrix below, is this situation a prisoner's dilemma?单项选择题

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Uber and Lyft compete over price in the ride-sharing market. They each may choose either a high price or a low price for their services. Based on the payoffs provided in the matrix below, is this situation a​ prisoner's dilemma?单项选择题