Answer to Question #91690 in Microeconomics for John Manda

Question

In the decades after World War II, the world’s two superpowers— the United States and the Soviet Union—were engaged in a prolonged competition over military power. This topic motivated some of the early work on game theory. The game theorists pointed out that an arms race is much like the prisoners’ dilemma. Explain why?

Answer 1

An arms race is much like the prisoner’s dilemma because the two competing superpowers had self-interest which prevented cooperation and leads to an inferior outcome. Both the United States and the Soviet Union were faced by the dilemma on whether to build new weapons or to disarm. Each country prefers to have more arms than the other because a larger arsenal would give it more influence in world affairs. However, each of the country also preferred to live in a world safe from the other country’s weapons.