Prisoner’s Dilemma is perhaps the most popular application of game theory. It analyzes the behavior of two rational individuals and deduces why any individual who is rational enough will never choose to cooperate with the other. It presents the awards available in different scenarios depending on the behavior of each of the two individuals involved.
The term is coined as such since it involves two criminals. Both belong to the same gang. Both were arrested and confined at a detention cell. As with most interrogation procedures, they were confined in individual rooms and prosecutors work on each prisoner, offering them with options to betray the other for information and evidence in exchange for lesser time in prison. Each prisoner is faced with two options – betray the other or cooperate with each other by choosing to remain silent.
But Prisoner’s Dilemma states that a rational prisoner will choose to betray the other because of the greater reward. Here’s why. If Prisoner A chooses to betray, he will be set free considering Prisoner B chooses to stay silent. The same happens to Prisoner B if he chose to betray Prisoner A. Prisoner’s Dilemma states that a prisoner will choose to betray the other because he will be set free as compared to having to serve at least a year if he chose to stay silent. But what both prisoners fail to consider is that there is a far greater punishment if both chose to betray each other. Both will serve two years in prison as opposed to both serving one year in prison if both choose to remain silent.
But a rational individual, by nature, is selfish and unable to trust another. Even if he has the instinct to stay silent, he will choose the opposite because of distrust. He will assume that the other will choose to betray him. If that happens, the prisoner who stayed silent will serve three years time and so the rational decision is to betray the other.
The Prisoner’s Dilemma presents this scenario to describe the behavior of any rational individual in any situation he’s in. All actions are geared towards self-interest thus, making cooperation quite impossible.