One should be hesitant to proclaim knowledge of the optimal strategy without knowing all the details. Whether or not the default strategy is to cooperate or betray is sensitive to the precise weights of the rewards for each combination of decisions, as well as the number of times the game is played. For example, in the simple version of the Iterated Prisoner's Dilemma, the optimal strategy is tit-for-tat: the default is to cooperate, and only betray in exchange for being betrayed.

I mean, that really isn't the default strategy. As Adam Smith recognized in Wealth of Nations, the default strategy is always to collude:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

> As Adam Smith recognized in Wealth of Nations, the default strategy is always to collude:

That's a misreading of Smith's point, but it's also irrelevant here, because it's quite a leap to assert that "the default strategy is to engage in blatantly illegal activity".

No, it's not a leap, it's why the activity is illegal: to artificially raise the cost of the default strategy.

> No, it's not a leap, it's why the activity is illegal: to artificially raise the cost of the default strategy.

Collusion is illegal because it harms consumers, not because collusion is the "default strategy".

In fact, collusion is not the default strategy simply because it is not stable in the long term; there's a lot of research which demonstrates this.

If it were not the favorable strategy, it wouldn't have to be illegal, because it would not be popular enough to hurt consumers. People habitually favor optimizing for short-term success because there is no long-term if you don't survive the short-term. Furthermore, it is actually repeated interaction that makes collusion/cooperation better than betraying, because of the opportunity to get punished on subsequent iterations. It is this medium-term thinking that pushes collusion (but not too much of it) into a position of dominance. In the truly long term, nothing is stable because we're all dead anyway.

That's only default for actors that are dumb. Most humans are smart enough to take advantage of an obviously better strategy that also doesn't really require coordination.

Right, but even that should be called implicit collusion.

technically yes, that is the default strategy in perfectly competitive markets, but collusion happens because it maximizes profit for both companies despite it being anti-capitalist.

for plausible deniability, the two companies typically don't directly talk to each other, but a lot of signalling happens via public statements and marketing channels to indicate a desire not to compete (as a simplistic example: raising prices when the competitor lowers theirs).