I think the answer is the second option the one that says "Both demonstrate that pride can lead to unnecessary suffering".
The Pardoner accumulated his wealth by selling pardons, or promises of salvation. People would do bad things, and then maybe regret it because they fear the wrath of God and not being able to go to heaven after they die, so they go to the Pardoner to buy these pardons which erase their sins. Although this has indeed been done in reality, soon it became illegal and outlawed, so the Pardoner was basically a criminal who took people's last penny just so he could become rich himself. It is quite ironic, given that he is a sort of a priest, and chooses to be vile himself.
An allegory is a story, poem, or drawing that has a hidden message or moral, usually political.
