Prisoner's Dilemma

A game concept that analyzes the losses and gains from conflict and cooperation between any two or more players, people, or other variables in a given situation. The word game is used here as a scientific metaphor for a much wider range of human interactions in which the outcomes depend on the interactive strategies of two or more persons who have opposing, or at best mixed, motives. Thus, the concept borrows mainly from political science and from game theory—a distinct and interdisciplinary approach to the study of human behavior founded and first written about by the mathematician John von Neumann in 1928.

History of the Concept

The concept of prisoner's dilemma is a product of the Cold War. In 1950, scholars Merrill Flood and Melvin Dresher at the RAND Corporation were grappling with the arms race between the United States and the Soviet Union. They posed a hypothetical situation in which two partners in crime are caught by the police, who do not have sufficient proof to convict them. Each individual is thus presented with a matrix of options.

In this matrix, if both prisoners cooperate by not saying anything, they are both rewarded at an equal, intermediate level because of insufficient proof. If only one prisoner defects, he receives the highest level of payoff by going free, while the other player faces the most unfavorable outcome of many years in prison. Finally, if both prisoners defect, each receives an intermediate, rather than maximum penalty, due to the in-built confession dividend in the matrix that they both receive. Thus, defection is seen as the best option for either player. The dilemma resides in the fact that each prisoner has a choice between only two options, but neither individual can make a good decision without knowing what the other one will do. The concept thus presents a curious struggle between individual and collective interests.

The concept assumes that the synergistic effect of cooperation will be smaller than the gains made from defection. Many people have argued that this assumption is not valid in many real-life situations, in which the absolute benefits from synergetic cooperation outweigh gains from noncooperation for any single party involved. The assumption, however, becomes more realistic if it takes into account that the synergy takes some time to get realized. In short-term decision making, which is the context in which prisoner's dilemma was initially studied, the actors supposedly do not have any specific expectations about future interactions or collaborations.

In the 1950s and 1960s, several studies of the prisoner's dilemma were performed in which two players acted out a prisoner's-dilemma-type situation repeatedly. Researchers seemed to explore all elements of [Page 599]the dilemma during this period, but a clear strategy did not emerge. As a result, by the 1970s, the prisoner's dilemma fell out of favor among researchers.

However, the question of when to be nice and when to defect was important considering that many business decisions fall into the category of prisoner's dilemma and a great deal of money would be at stake. In search of this elusive strategy, in the early 1980s, the political scientist Robert Axelrod organized a series of computer tournaments. The simplest strategy submitted, “TIT for TAT,” won in two successive computer tournaments and basically illustrated that one should cooperate while confronting an opponent on the first round and for the following rounds simply do what the other player did in the round before.

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