Prisoner’s dilemma
Through the study of microeconomics, there is a particular theory interests me. It is the prisoner’s dilemma effect. Although I had heard the term several times before, I did not the definition of it. Today I finally get the chance to learn this effect, and I would like to share my understanding with you.
The prisoner’s dilemma states that when each players in a game has dominant strategy, they will use that strategy. But the payoffs for both parties are lower than the outcome received by taking their dominated strategy. The are three elements that required explanation: the game is the situation when people make decisions, they must taking consideration on other people’s possible reaction to that decision. The players are the groups of people involved in a game, and the payoff is the outcome received by the players as a result of that decision. If the player obtains a higher payoff in one of the combinations of strategy, no matter what will other players react, then that player will have the dominant advantage by applying that strategy. Otherwise, it is a dominated strategy. The prisoner’s dilemma theory is about a fiction scenario of two prisoners committed serious crime that may put them in jail for a long time. However, the prosecutor did not have hard evidence, so these two prisoners only need to server one year sentence in jail. They kept these two prisoners separately and told each of them his crime companion had confessed. Hence if he remains silence, he will get a life-time sentence with his companion walk-free. As a result, both of them admitted their crime. The theory has been wildly used and we can find symmetric situation in our life. For example, there are a congestion at the left-turn line in front of the traffic light. Since the line is long, it will take you 5 minutes to make the turn. Nevertheless, there is still another option to jump the queue from the straight-going lane at the right, so you will be able to turn left next signal in the next 1 minutes. Therefore, you have to choose to jump a queue or stick to the lane. We assume other drivers are rational and fully self-interested.Consequently,they will choose as well. The two players in this game are you and other drivers and the payoff will be the time saved. As other drivers may jump ahead of you even you do not stick to the lane, your waiting time will increase, and vice versa. Let's make a matrix to clarify the problem.
In this case, the dominant strategy for both parties is to cut the lane because the waiting time will be shorter despite other player’s choice. As we can see, everyone needs to wait for six minutes, which is longer than we both stick to the rule. More importantly, people will tend to cut the lane again in with economic perspective due to the cost-benefit principle.
That is a rough sample that may not be relatively applicable to the reality. We face more complicated circumstances in our life, and the prisoner’s dilemma trends to repeat itself. The corporation is the only way we can seek a way out and increase the outcome for all players. The Tit-for tat concept can be used to establish trust between parties. It is the strategy for playing the repeated prisoner’s dilemma game in which players cooperates on the first move, then mimics their partner's last move on each successive move.
The prisoner’s dilemma is an interesting model to study, I wish this will help you to understand it.
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