The correct answer is c. It challenges the ideas of a single dominant strategy.

This is the correct answer because the prisoner's dilemma is a condition when the individuals maximize their self-interests. In this game, the two criminals focused on self-interest and reducing their own years of imprisonment. The dominant strategy for each criminal is to confess, which leads to greater years of imprisonment as compared to if both the criminals cooperate. Thus, the dominant strategy results in greater years of imprisonment for both people. This theory is applicable to business as similar situations can be seen in a business environment where the possible strategies of competitors cannot be predicted.

For instance, there are two firms in a market, firm A and firm B, and both the firms are unaware of the marketing strategies of each other. If firm A reduces the price of its product to gain a larger market share with the sale of $700, firm B will lose the market. If firm B reduces the price of its product to gain a larger market share with the sale of $700, firm A will lose the market. If both the firms do nothing, both will sell products of $500. If both reduce the price level, both will sell products of $300. Here, the dominant strategies of both the firms are to reduce the price level, instead of cooperating with each other in keeping the price high, which leads to a larger profit. In this case, the dominant strategy leads to lower pay-offs and thus the idea of a single dominant strategy is challenged.