Thursday, April 12, 2012
Game Theory: Prisoner’s Dilemma
Prisoner’s Dilemma, a famous game used to demonstrate the ironic nature of incentives, is one example of game strategy. In the game, there are two arrested prisoners convicted of a crime. The two prisoners are separated into different rooms, where they are asked whether or not they committed a crime (let’s call the prisoners Red and Blue). As seen above , there are four possible scenarios. If Red confesses but Blue does not, Red gets 0 years in jail while Blue gets 3 (visa versa). If they both withhold, they each get 1 year. Finally, if they both confess, they each get 2 years in jail. No matter what circumstance a person considers, they realize that it is always the best choice for an individual to confess.
Now, let’s pretend you are the prisoner named Red. There are two possible scenarios.
I. You think Blue will NOT confess.
[Your Choices: Confess and get 0 years in jail. Don't confess and get 1 year in jail]
If he doesn't confess, then it is in your best interest to confess!
I. You think Blue will confess.
[Your Choices: Confess and get 2 years in jail. Don't confess and get 3 year in jail]
If he does confess, then it is still in your best interest to confess!
Both parties are selfish. It makes sense that even though the best option for both parties not to confess, this would rarely happen. See next two slides for ideal outcome vs actual outcome.