Mary and Sam are the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the corn. If they work independently, they will each earn S100. If they decide to work together and both lower their output, they can each earn S150. If one person lowers output and the other doesn't, the person who lowers output will earn SO and the other person will capture the entire market and will earn S200. The table below represents the choices available to Mary and Sam. What is the best choice for Sam if he is sure that Mary will cooperate? If Mary thinks Sam will cheat, what should Mary do and why? What is the prisoner's dilemma result? What is the preferred choice if they could ensure cooperation? (Each entry lists Sam's earnings first, and Mary's earnings second.)
Mary
A B
Sam A $100,$100 $200,0
B 0,$200 $150,$150
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