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Game theory is the study of strategic decision-making, where individuals or groups make choices that affect each other. It explores how people make decisions when their outcomes depend not only on their own choices but also on the choices others make.
Today, I am going to take you through one of the most famous problems in game theory—The Prisoner’s Dilemma.
The Prisoner's Dilemma is a classic example in game theory that demonstrates why two completely rational individuals might not cooperate, even if it appears that it's in their best interest to do so.
Here's how it works.
The Scenario
Imagine two individuals, let’s call them Alice and Bob, who have been arrested for a crime.
They are kept in separate rooms and cannot communicate with each other. The authorities do not have enough evidence to convict them on the main charge, but they can convict them on a lesser charge.
To get a confession, they offer each prisoner a deal.
The Deal and its Consequences
Each prisoner has two options: cooperate with the other by staying silent, or defect by betraying the other and confessing. The outcomes are as follows:
If both prisoners cooperate ✅ ✅(stay silent): They each get a light sentence (e.g., 1 year in prison).
If one defects and the other cooperates ✅ ❌ : The defector goes free, while the other receives a heavy sentence (e.g., 10 years).
If both defect (betray each other) ❌ ❌ : They both get a moderate sentence (e.g., 5 years).
The Dilemma
The dilemma arises because each prisoner has a strong incentive to defect, regardless of what the other does:
If Alice thinks Bob will stay silent, she would benefit most by defecting, as this would mean she goes free.
If Alice thinks Bob will defect, she also benefits by defecting, since it reduces her sentence from 10 years to 5.
Thus, the rational choice for both prisoners, aiming to minimize their sentences independently, is to defect. However, if both prisoners defect, they each end up with a worse outcome than if they had both cooperated.
This is ‘The Prisoner’s Dilemma.’
The Axelrod Tournament
In the 1980s, political scientist Robert Axelrod set up an experiment to find the best strategy for the repeated Prisoner's Dilemma, where players face each other multiple times, making it possible to learn from and respond to each other’s past choices.
How the Tournament Was Set Up
Axelrod invited experts to submit computer programs (strategies) that would play the Prisoner’s Dilemma against each other over many rounds. These are pre-coded scripts that were of mass complexity, or just plain ol’ simple.
Rules of Engagement: Each strategy could either cooperate or defect in each round, aiming to earn the most points over 200 rounds of interaction. The goal was to maximize points by balancing cooperation with retaliation.
Rounds and Points: Points were awarded just like in the original dilemma: mutual cooperation led to moderate points for both, mutual defection resulted in few points for each, and if one defected while the other cooperated, the defector received maximum points while the other received none.
(I’d suggest you watch the whole video on the different strategies that were entered into the competition, interesting stuff)
After 200 rounds, one of the simplest strategies, called Tit for Tat, emerged as the winner. It was incredibly straightforward:
It started by cooperating.
Afterward, it mirrored its opponent’s last move: if the opponent cooperated, it cooperated; if they defected, it defected in response.
The success of Tit for Tat revealed four traits that made strategies effective in repeated interactions:
Niceness: Tit for Tat never initiated defection; it started by cooperating and only retaliated when the opponent defected. Strategies that were “nice” (starting with cooperation) consistently performed better.
Forgiveness: Tit for Tat was forgiving. If an opponent who defected returned to cooperation, Tit for Tat would also cooperate again, allowing relationships to reset instead of holding grudges.
Retaliation: To avoid being taken advantage of, Tit for Tat responded to defection with defection. This helped it protect itself against overly exploitative strategies.
Clarity: The simplicity of Tit for Tat made it predictable and trustworthy to other strategies, leading to more mutual cooperation over time.
Here is what the Prisoner’s dilemma tells us about life:
Simplicity pays off. Tit for Tat outperformed all the other complicated strategies because of its consistent behavior and straightforwardness. It promotes cooperation and trust.
The most complex patterns struggled over time because they were unpredictable and other strategies couldn’t establish trust.
Simplicity wins.
Be clear, predictable, and fair in your actions. People trust what they understand.
Start with kindness, but don’t be afraid to stand up for yourself when needed.
Forgive quickly. Holding grudges doesn’t pay off in the long run.
You don’t need to outsmart everyone—sometimes, showing up consistently is enough.
The goal? Build lasting cooperation and mutual benefit. Win-Win.
In life, as in game theory, nice guys finish first. 🥇
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