Game theory in 5 minutes

The prisoner’s dilemma is a fundamental problem in game theory that demonstrates why two people might not cooperate even if it is in both their best interests to do so

Why? Refer to the following payoff table (scale of 1-5, with 5 being the highest)

  1. Both cooperate – 3 points each
  2. One party cooperates and the other party defects
  • the one who defects = 5 points (reason: taking advantage of the one who cooperates)
  • the one who cooperates = 0 point (reason: being taken advantage of)

3.    Both defect – 1 point each

To further illustrate, assume there are 2 prisoners. Both are kept in separate rooms but given the same offer, i.e. (a) betray the other/testify for the prosecution (defect) or (b) keep silent (cooperate). What would you do? Essentially your action will be dependent on the other party.

If A betrays the other (defect) and B keeps silent – A will be free to go while B will serve 10 years in prison

If both keep silent then both will only be sentenced to 6 months in jail.

If both choose to betray each other, both will receive a 5 year sentence

That’s the dilemma. And more often than not, we face similar dilemma in our interpersonal relationships. Sounds all too familiar?

So what should we do?

What is the optimal solution? Continue to Part 2: What is 90% tit-for-tat?

11 thoughts on “Game theory in 5 minutes”

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