Quiz: The Prisoner's Dilemma 4 questions · 80% to pass 1. In the Prisoner's Dilemma, what is the Nash Equilibrium?Both players cooperateBoth players defectOne cooperates, one defectsBoth players randomizeThe Nash Equilibrium is mutual defection: neither player can improve their outcome by unilaterally changing strategy. This is individually rational but collectively suboptimal.2. A bank run is an example of the Prisoner's Dilemma because:Banks are always insolventIndividual rational withdrawal causes collective bank failureDepositors are irrationalThe government forces withdrawalsEach depositor's rational choice (withdraw before others) creates the collective outcome they feared (bank failure), even when the bank was solvent.3. What strategy won Robert Axelrod's repeated Prisoner's Dilemma tournament?Always DefectAlways CooperateTit-for-TatRandomTit-for-Tat starts with cooperation, then mirrors the opponent's last move. It's simple, transparent, retaliatory but forgiving, and outperformed complex strategies.4. FDIC deposit insurance solves the bank run dilemma by:Making banks keep 100% of deposits in the vaultChanging the payoff matrix so staying is rational regardless of others' actionsPreventing withdrawals during panicsPunishing depositors who withdraw earlyFDIC insurance guarantees your deposit regardless of what other depositors do. This changes the payoff matrix so that withdrawing offers no advantage over staying, eliminating the incentive to run. Check answers Retake quiz Back to lesson Next lesson →