Prisoner's dilemma

Definition

The prisoner's dilemma is a standard example of a game in which two players must choose between cooperation and betrayal, with the outcome for each dependent not only on their own choice but also on the choice made by the other player. This scenario highlights the conflict between individual rationality and collective benefit, demonstrating how two rational individuals may not cooperate even if it appears that it is in their best interest.

5 Must Know Facts For Your Next Test

1. In the classic prisoner's dilemma, if both players betray each other, they receive a lower payoff than if both had cooperated, which emphasizes the tension between self-interest and mutual benefit.
2. The dilemma is often represented in a payoff matrix, allowing for easy visualization of outcomes based on different strategies chosen by the players.
3. Rational players may end up in a worse outcome (both betraying) than if they had cooperated, showing how individual rational choices can lead to suboptimal collective outcomes.
4. The prisoner's dilemma can be applied to real-world situations like business competition, environmental issues, and social dilemmas where cooperation could lead to better results for all parties involved.
5. Repeated interactions or iterations of the prisoner's dilemma can encourage cooperation through strategies like tit-for-tat, highlighting how relationships and trust can evolve over time.

Review Questions

• How does the prisoner's dilemma illustrate the conflict between individual rationality and collective benefit?
  • The prisoner's dilemma showcases how individuals acting rationally for their own benefit can lead to worse outcomes for everyone involved. When both players choose to betray each other, they receive lower payoffs compared to if they had cooperated. This scenario highlights that while rational decisions may seem beneficial individually, they can result in collective loss when trust and cooperation are not prioritized.
• Discuss the role of dominant strategies in the prisoner's dilemma and how it affects the decisions of the players involved.
  • In the prisoner's dilemma, each player has a dominant strategy to betray, regardless of what the other player decides. This leads both players to choose betrayal as their best option, resulting in an equilibrium that is less favorable than mutual cooperation. The existence of dominant strategies underscores how rational decision-making can lead to outcomes that are not optimal when considering the overall situation.
• Evaluate how strategies like tit-for-tat can promote cooperation in repeated scenarios of the prisoner's dilemma.
  • In repeated versions of the prisoner's dilemma, tit-for-tat strategies encourage cooperation by starting with a cooperative move and then mimicking the opponent's previous action. This approach fosters trust and discourages betrayal since players know that retaliatory actions will follow any betrayal. By promoting a cycle of cooperation through reciprocity, tit-for-tat shows how relationships and long-term interactions can lead to better outcomes for all parties involved.

Related terms

Dominant Strategy: A strategy that yields a higher payoff for a player, no matter what the other player does.

Nash Equilibrium: A situation in a game where no player can benefit by changing their strategy while the other players keep theirs unchanged.

Tit-for-Tat: A strategy in repeated games where a player responds to an opponent's previous action, starting with cooperation and then mimicking the opponent's last move.