Prisoner's Dilemma - Explained
What is a Prisoner's Dilemma?
Written by Jason Gordon
Updated at June 30th, 2021
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Table of Contents
What is a Prisoner's Dilemma?How does the Prisoner's Dilemma Work?Examples of Prisoners DilemmaBrexit as the Real World Example of Prisoner's DilemmaAcademic Research on the Prisoners DilemmaWhat is a Prisoner's Dilemma?
When two individuals trying to resolve an issue act in their own self-interests rather than aiming for an optimal outcome, and as a result end up worsening the situation instead of resolving it, its called the Prisoners Dilemma paradox. Decision analysis of conflict resolution in the Prisoners Dilemma shows that each person was serving his/her own self-interest at the expense of the other person, leading to a poorer outcome for both parties. Cooperation and serving a common cause would have yielded better results.
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How does the Prisoner's Dilemma Work?
To put it simply, when working in teams of two or more people, working towards the common good is the better option than choosing self serving actions and putting the self above the team.
Examples of Prisoners Dilemma
Consider the example of two thieves A and B suspected of robbery. They now have the option of entering a plea bargain to minimize their sentences. If A pleads guilty, it reduces his sentence to a two year stint in the cooler, same goes for B. If A pleads not guilty, then he could face criminal charges and a full sentence of 5 years if convicted, same goes for B. However, if A pleads not guilty but B pleads guilty, A could avoid the sentence altogether, while B goes to the behind the bars for the full sentence term. The converse also holds true in case of B.In this scenario, if A and B were inclined to think as a team and aimed for the best outcome, they would both plead guilty, serve their minimum sentence together and get out after two years. But, when Prisoners Dilemma comes into play, both parties act in their own self-interest at the expense of the other. In this case, A is banking on B entering a guilty plea bargain so he can get away scot free, B is thinking along the same lines. Both enter a not guilty plea, end up getting convicted and serving the full sentence, thus bringing about the worst case scenario for not being able to think beyond self-serving interests. When the Prisoners Dilemma plays out more than once, its called iterated Prisoners Dilemma. It is also a major reason for cooperation between parties with opposing views - so as to improve their common lot.
Brexit as the Real World Example of Prisoner's Dilemma
Britains decision to quit the European Union in June 2016, has created the Prisoners Dilemma paradox for both parties. Negotiating its political and economic ties with the European Union as a non-member has resulted in impasses that have been impeding the leaving process. European Union is motivated to make an example of Britain to any other member nations thinking of quitting the Union. As such, it isnt ready to give an inch where single market norms are concerned. Britain is similarly looking to reap the benefits of the unions single market without having to incur the costs of staying with the union. Both parties are ignoring the benefits of being allies while they prioritise their own self-interests.
Academic Research on the Prisoners Dilemma
- Rational cooperation in the finitely repeated prisoners' dilemma, Kreps, D. M., Milgrom, P., Roberts, J., & Wilson, R. (1982). Rational cooperation in the finitely repeated prisoners' dilemma. Journal of Economic theory, 27(2), 245-252. This paper studies the iterated Prisoners Dilemma and the different factors at play that lead to a measure of cooperation between players in successive iterations.
- Bounded complexity justifies cooperation in the finitely repeated prisoners' dilemma, Neyman, A. (1985). Bounded complexity justifies cooperation in the finitely repeated prisoners' dilemma. Economics letters, 19(3), 227-229. This letter studies the reasons people cooperate in a finite number of Prisoners Dilemma iterations.
- Collective action as an agreeable nprisoners' dilemma, Hardin, R. (1971). Collective action as an agreeable nprisoners' dilemma. Behavioral science, 16(5), 472-481. This paper studies Prisoners Dilemma in finite iterations under the constraints of the Mancur Olsons analysis and presents its findings.
- Coordination versus prisoners' dilemma: Implications for international cooperation and regimes, Snidal, D. (1985). Coordination versus prisoners' dilemma: Implications for international cooperation and regimes. American Political Science Review, 79(4), 923-942. This paper applies the Prisoners Dilemma paradox to the study of international cooperation and influence.
- Adam Smith and the prisoners' dilemma, Tullock, G. (1985). Adam Smith and the prisoners' dilemma. The Quarterly Journal of Economics, 100, 1073-1081. This article analyses a matrix of Prisoners Dilemma with cooperating parties, and tests Adam Smiths theory about the Discipline of Continuous Dealings.
- Renegotiation-proof equilibria in repeated prisoners' dilemma, Van Damme, E. (1989). Renegotiation-proof equilibria in repeated prisoners' dilemma. Journal of Economic theory, 47(1), 206-217. This paper examines the impact of renegotiation equilibria in iterations of Prisoners Dilemma.
- The Prisoners' dilemma in the invisible hand: an analysis of intrafirm productivity, Leibenstein, H. (1982). The Prisoners' dilemma in the invisible hand: an analysis of intrafirm productivity. The American Economic Review, 72(2), 92-97. This journal looks at the existence and impact of Prisoners Dilemma in the analysis of intrafirm productivity.
- Cooperation and group size in the n-person prisoners' dilemma, Bonacich, P., Shure, G. H., Kahan, J. P., & Meeker, R. J. (1976). Cooperation and group size in the n-person prisoners' dilemma. Journal of Conflict Resolution, 20(4), 687-706. This journal studies the cooperation and conflict of interest in Prisoners Dilemma when group dynamics are at play. This journal looks at the gameplay of Prisoners Dilemma in different group sizes.
- Dynamic instabilities induced by asymmetric influence: prisoners' dilemma game in small-world networks, Kim, B. J., Trusina, A., Holme, P., Minnhagen, P., Chung, J. S., & Choi, M. Y. (2002). Dynamic instabilities induced by asymmetric influence: prisoners dilemma game in small-world networks. Physical Review E, 66(2), 021907. This journal examines the dynamics of Prisoners Dilemma in the scenario of small-world networks.
- Beyond the Prisoners' Dilemma: Coordination, Game Theory, and Law, McAdams, R. H. (2008). Beyond the Prisoners' Dilemma: Coordination, Game Theory, and Law. S. Cal. L. Rev., 82, 209. This paper focuses on the game play of Prisoners Dilemma in the world of legal scholarship.
- An empirical approach to the prisoners' dilemma game, Lave, L. B. (1962). An empirical approach to the prisoners' dilemma game. The Quarterly Journal of Economics, 424-436. This journal analyses Prisoners Dilemma with emphasis on empirical data.
- Prisoners' dilemma as a game with incomplete information, Bolle, F., & Ockenfels, P. (1990). Prisoners' dilemma as a game with incomplete information. Journal of Economic Psychology, 11(1), 69-84. This paper studies the psychology of Prisoners Dilemma in the absence of complete information.