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Prisoner's Dilemma
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One of the most popular models in game theory, the prisoner’s dilemma represents a compelling story with a range of takeaways.

The Prisoner’s Dilemma is a mental model that captures the tension between mutually beneficial cooperative behaviour versus damaging but appealing individually driven options.

THE CHALLENGE.

Here’s the original challenge: imagine two thieves, A and B, are arrested and imprisoned without being able to communicate to each other. If A confesses and B doesn’t, A will be set free and B will serve three years. The reverse will happen if B confesses and A doesn’t. If neither confesses, they will both serve one year. If both confess they will both serve two years.

Variations of this scenario are common, but the point is the tension between individual and cooperative interests. When viewing the problem from a collective point of view, the cooperative route is best, with both receiving one year each. However, from an individual point of view, A will benefit from betraying B if they think that B will remain silent (A will be free). Alternatively, if A believes that B will betray them, A can reduce the time served from three to two years by also betraying B. Either way, when thinking from an individual perspective, it makes sense to betray the other.

IMPLICATIONS.

The prisoner’s dilemma describes many real-world situations where cooperative behaviour is beneficial though has tension with an individual approach, particularly when inspired by mistrust or a defensive stance. It also speaks to the need to ‘guess’ another’s intentions while defining your own course of action — when the irony lies in the other party doing exactly the same, trying to guess your intentions to define their action.

In iterative simulated versions of the game, where the game repeats, some studies have demonstrated that the ‘tit for tat’ approach is most effective. So only betraying in response to your opponent's betrayal and moving back to cooperation when they do likewise (see resources for more).

HOW TO APPLY IT?

As with any story, the Prisoner's Dilemma is open for interpretation. For me, the key takeaway is the potential for a cooperative approach versus the tenuous nature of achieving cooperation in the context of self-interest and mistrust. It can therefore be used as a call to action to improve the odds of cooperation by building up a reputation for integrity and maintaining strong, transparent communication.

Check the In Practice section below for this model for further examples that bring this model to life.

Actionable Takeaways
• Identify win-wins.

Take time to consider the possible win-wins, even with potential competitors. What are the united actions you might take together that will benefit you both and what would be the cost of not working cooperatively?

The individual approach in the Prisoner's Dilemma arises from distrust. Establishing a track record and reputation for sticking to your word and working cooperatively with chosen partners will lower the tendency for that suspicion and provide opportunities for more consistent cooperation.

• Communicate and iterate.

Unlike the story of the Prisoner's Dilemma, in the real world, we generally have the opportunity to communicate, negotiate, and establish assurances. Ensure that you open conversations with your potential partners to consider and find a commitment for shared interests. In the real world, such situations will often come up more than once, so you also have the opportunity to appeal to longer-term collaboration and reputation.

• In iterative scenarios, employ ‘tit for tat’.

University of Michigan’s Robert Axelrod has done exhaustive testing for repeat scenarios of the Prisoner's Dilemma. His research revealed that the most effective strategy in these situations is to use ‘tit for tat’, that is never initiated betrayal, but always respond to it in kind while still allowing a rebalancing afterwards. Obviously, his scenario assumed that each betrayal was always survivable.

Explore More
Limitations

In real life, we mostly deal with repeated Prisoner's Dilemmas, where we can choose strategies to reward cooperation or punish betrayal over time. The incentives that individual decision-makers face are also altered by collective action such as rules, laws, and social punishment.

We generally also have the opportunity to communicate within our versions of the prisoner’s dilemma, so we can negotiate and seek a level of confidence not possible in the story.

In Practice

Listen to this amazing podcast episode of golden balls.

Radiolab presents a truly gripping investigation into a game show based on the prisoner's dilemma. It really is fantastic storytelling and is highly recommended as a fascinating insight into this model.

Global warming.

If countries acted cooperatively, they would cut carbon emissions to help reduce global warming, possibly taking a hit to their economy as a result (let’s put renewable and green driven economies to one side for this example). However, if a country believes that another country will not take the action required then they might fear for the resulting economic advantage they will gain. The mistrust underlying a cooperative strategy, even when it's in everyone's interests, might lead to an individual strategy rather than a cooperative one.

A common example cited in relation to the prisoner’s dilemma is the cigarette industry. When cigarette advertising was legalised in the US competing firms theoretically could benefit from not advertising and sharing the market. If one advertised, they would gain a dominant share, however, if both advertised they would split the market and have less profit because of advertising costs. It is of course more complex than that, particularly in terms of growing a market with advertising, but that challenge plays itself out in a range of contexts.

Origins & Resources

The Prisoner's Dilemma was originally posed by mathematicians Merrill Flood and Melvin Dresher while working for Rand corporation in the 1950s. It was actually named sometime later by Princeton mathematician Albert Tucker.

The model gained a boost of profile when it was featured in Robert Axelrod’s book, The Evolution of Cooperation in 1994. Now in its fifth edition, the book is the foundation for the ‘tit for tat’ strategy outlined in this model’s summary during iterative prisoner’s dilemma scenarios. Though he did note it was dependent on a number of factors. You can read more about his research in this New York Times article.

Finally, if you want to experience the concepts in the Prisoner's Dilemma, it's worth investing about 30m into this free interactive and educational game

My Notes

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