The prisoner’s dilemma is a much-discussed subject in game theory. Police arrested two individuals for their involvement in some criminal activities and put them in prison. They have adequate evidence to frame charges and hand them two years of imprisonment but not for a maximum of ten years.
Police approach a prisoner and make an offer in return to testify against the other person. If she betrays the other and the other person remains silent, she can go free. If she keeps quiet and the other person gives evidence against her, she gets the maximum punishment of 10 years. If they both remain silent, the existing term of two years continues. If they both testify against each other, they both get five years.
Imagine A is a rational decision-maker, and she assumes that a similar offer may also have gone to prisoner B. She starts from the point of view of the other person before deciding on her own. Person B has two options: remain silent or betray person A. If B remains silent, A can remain silent (2 years) or cross B (0 years). Betray B is currently the better of the two. If B testifies, A can remain silent (10 years) or betray B (5 years). Betray B is the better one here again. In other words, A has no option but to give evidence against B.
Cooperation vs Competition
Decision-making such as this starts with knowing the potential strategies of the other. Once sorted out, the player will opt for the option that protects her, irrespective of the other’s choice.
A rational decision may not be the decision that gives the maximum payoff. In the present story, cooperation might appear as that option, where each serves two years in jail. But it was not a cooperative game, where both the parties trust each other and form a joint strategy – to remain silent. Therefore, it is not the optimal option in cases where the players compete against each other.
Cold War and Nuclear Build-Up
The Nuclear build-up between the USSR and the USA during the Cold War period is an example of a prisoner’s dilemma in real life. From the viewpoint of the USA or the USSR, the rational (strategic) option was to pile up more nuclear warheads instead of reducing them, although one has every right to argue that the latter could have been the better choice for humankind.
