Prisoners Dilemma

The Prisoner’s Dilemma is a game devised by game theorists to test real-life situations where two parties can choose to compete or co-operate in the pursuit of optimal outcomes (best) but where the risk of sub-optimal (worst) or median outcomes may also result. In its original version, which has been widely extrapolated and iterated, two prisoners are arrested, put in separate cells and given a range of options. If neither confesses, they each get one year in prison. If one confesses but the other doesn’t, the prisoner who confesses is exonerated and the other gets three years. If both confess, they both get two years. So depending on what each says, the outcomes range from 0 to three years for each prisoner, or two or four years in aggregate. In the context of business, the scenario shifts to what competitive decisions companies make based on what they perceive their competitors will make, against a matrix of best-to-worst profit outcomes.