The prisoner's dilemma applies to oligopoly because firms face a choice between:

1. The dilemma is defined by the payoff structure rather than by any particular industry. 2. The prisoner's dilemma is a scenario in which the gains from cooperation are larger than the rewards from pursuing self-interest. 3. Oligopolists weigh the pros and cons of competition versus collusion at a given point in time. 4. Cooperation here means holding to the collusive output, and self-interest means undercutting. 5. That maps directly onto the dilemma's two strategies. _Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 10 'Monopolistic Competition and Oligopoly', sections 10.1-10.2_