prisoner's dilemma

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Prisoner's Dilemma

A classic problem in game theory. In the problem, two suspects are arrested and questioned separately by police. If one accuses the other while the other remains silent, the accuser will go free and the silent party will go to jail for 10 years. If each accuses the other, both go to prison for five years. If both remain silent, they only go to jail for one year. According to the dilemma, the rational response for each of the prisoners is to accuse the other (maximizing the possibility each will go free), even though this produces an irrational result (that both go to jail for five years).

The prisoner's dilemma is used to explain a variety of economic and political phenomena when all parties involved are self-interested, rational and have imperfect information. For example, two companies may compete for a promising employee. They offer increasingly attractive salaries. If one company gives up, the other company will take the employee. So both quite rationally increase the offers. This however could produce the irrational result that a new employee is paid too highly. The prisoner's dilemma seeks to explain why rational actions sometimes lead to irrational conclusions.
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prisoner's dilemma

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
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THEOREM 1 A combination of actions ([a.sub.1], [a.sub.2]) in round r of the repeated weak extended prisoners' dilemma (EPD) game is compatible with a subgame perfect equilibrium if and only if r [greater than or equal to] 3, or r = 2 and ([a.sub.1], [a.sub.2]) [member of] {(C, C), (D, D), (D, A), (A, D), (A, A)}, or r = 1 and ([a.sub.1], [a.sub.2]) [member of] {(D, D), (A, A)}.
The N-player Prisoners' Dilemma game can be defined by the following three properties:
Volumes have been written about the prisoners' dilemma because it focuses on what is lost when participants cannot communicate.
Although the Tit-for-Tat strategy cannot possibly win the iterated Prisoners' Dilemma in an encounter with another single strategy, none the less it has--following the principle that 'weakness is strength'--the best chance to come out as overall victor in a tournament of all against all (for details, see Robert Axelrod.
Robert Jervis's article "Cooperation under the Security Dilemma" is the best known theoretical example of the prisoners' dilemma used during the height of the Cold War to examine US-Soviet relations in light of strategic nuclear weapons.
The prisoners' dilemma is a ubiquitous problem that can be effectively addressed by good leaders, but which is a major obstacle to achieving good leadership.
Since it is a negative sum game, however, the only thing we get out of game theory is that conflict will characteristically be a prisoners' dilemma, with both parties having a dominant strategy which is socially non-optimal.
Ever since 1980, when I bet the liberals of New York that Reagan would win easily (and didn't have to buy my own lunch for months afterward), I have sympathized with the "prisoners' dilemma" that faces liberals and leftists every four years.
(1) He also candidly acknowledges his growing doubts about the validity of the efficient capital markets hypothesis (ECMH), at least in its purest "strong" version, as a basis for disclosure policy, (2) and instead suggests that the famous "prisoners' dilemma" is a better theoretical model on which to build a disclosure regime.
Two forms of 2 x 2 games, Prisoners' Dilemma and Chicken, are applied to international crises involving the United States and the Soviet Union.
But what about the basic idea from game theory that we can improve efficiency if we overcome the prisoners' dilemma in a cooperative approach?