Sharon’s family has run Tip-Top gas & grocery chain of convenience stores for a very long time. On the other hand, James has worked on his business from scratch to where it is presently, a local empire. Nevertheless, they are both fighting for an increased share in the convenience market. It should be noted that being typical business people, the two rivals are out to maximize their revenue and this can be achieved through maximum market share. However, the increase in the price of gas did not work in their favor and they both had to entice their customers through promotions which eventually reduced their revenue. In their quest to increase individual market share, the two rivals are faced with two options to choose from. They can either choose to cooperate or compete. To cooperate the two have to share information about their moves and each has to trust the other (Talent, 2010b). Conversely, if they choose to compete they have to ensure that their moves are as secret as possible.
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Revenue from cooperation is more or less assured though it is less than the revenue one can earn from competing. Unfortunately, the revenue from competing is highly risk given that the market is small and one will soon learn moves taken by the opponent. Arguably, the two rivals are better off sharing information than competing as this will save them from further decline in revenue through expanding their promotions. The dilemma is whether to trust the information given by the opponent or not given that the opponent can lie. As it is seen in the end, while everybody thinks that the two have agreed to cooperate, it turns out that Sharon had lied to James (Talent, 2010b).
Talent (Speaker). (2010b). The Prisoner’s Dilemma [DVD]. United States of America: University of Phoenix.