I was talking with Seth today about The Prisoner’s Dilemma. Some Business Schools teach this in game theory, using a simple game. Two people play, without being able to see each other. In class they would face each away from each other, and the teacher would be the “referee”. They each have a red card and a green card. The rules are a variation of what follows:
There will be ten turns in a game.
Each player has to maximize their own points
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Player A
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Red
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Green
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Red
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Green
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Player B
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Red
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Red
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Green
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Green
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Score
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Both score 5
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A gets nothing B scores 50
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B gets nothing A scores 50
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Both score 10
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So the strategy here would be to agree with your opponent that you would both agree to hold up the green card for every turn. Then you’d both score well through the game. Only at the last possible turn you hold up the red card, knowing that your opponent will most likely hold up green. He’s out of turns to do it back to you, and so you gamble the last 5 points on a reasonably sure 45 point return with no consequences. This game is an illustration of the Prisoner’s Dilemma. From Wikipedia:
In game theory, the prisoner’s dilemma (sometimes abbreviated PD) is a type of non-zero-sum game in which two players may each “cooperate” with or “defect” (i.e. betray) the other player. In this game, as in all game theory, the only concern of each individual player (”prisoner”) is maximizing his/her own payoff, without any concern for the other player’s payoff. In the classic form of this game, cooperating is strictly dominated by defecting, so that the only possible equilibrium for the game is for all players to defect. In simpler terms, no matter what the other player does, one player will always gain a greater payoff by playing defect. Since in any situation playing defect is more beneficial than cooperating, all rational players will play defect.
The unique equilibrium for this game is a Pareto-suboptimal solution—that is, rational choice leads the two players to both play defect even though each player’s individual reward would be greater if they both played cooperate. In equilibrium, each prisoner chooses to defect even though both would be better off by cooperating, hence the dilemma.
Let me repeat: Rational choice leads the two players to both play defect even though each player’s individual reward would be greater if they both played cooperate.
’nuff said.