A situation known as a “prisoner’s dilemma” occurs when individuals always have an incentive to make decisions that have a negative impact on the group as a whole. There are numerous economic elements where the prisoner’s dilemma arises.
In the traditional prisoner’s dilemma, individuals find that betraying the group yields greater rewards than cooperating.
Mathematicians Merrill Flood and Melvin Dresher first provided the typical example of the prisoner’s dilemma, which Albert W. Tucker later codified. It depicts the following scenario:
Two people are taken into custody and questioned in separate locations. There aren’t any other witnesses accessible, and the evidence the government has is only strong enough to condemn one of the prisoners—and only if the other prisoner gives a witness statement. Each prisoner receives a deal from the authorities. They have two options: they can cooperate with the other prisoner by keeping quiet or betray the other prisoner by admitting that the other prisoner committed the crime.
Three possibilities are conceivable in light of this scenario:
Both of them will serve 3 years in prison if they don’t speak.
Both of them will serve 5 years in prison if they betray the other.
The prisoner who testified is released, while the prisoner who remained silent is sentenced to 10 years in prison if one betrays the other, but the other does not.
It can be assumed that all completely rational inmates will betray the other, leading to the only possible ending of both prisoners betraying one other. Betraying the other prisoner offers a bigger reward than cooperating with them.
Logically, chasing individual rewards should result in a better outcome, but, in a prisoner’s dilemma, pursuing individual rewards results in a poorer outcome for the person. Each player may develop a cooperative strategy if the same games are played repeatedly. People have come up with various ways to get around the prisoner’s dilemma to choose better overall outcomes despite what may appear to be poor individual incentives.
