Реферат: The Prisoners’ Dilemma (PD) and its applications

The Prisoners’ Dilemma (PD)and its applications

In the real world one canobserve not only successful episodes of cooperation in politics, business andeveryday life but also unsuccessful ones with all its negative effects.  The Prisoners’ Dilemma (PD) can explain thesenon-cooperated situations. The PD can be defined as a game situation where twoplayers have simultaneously made a strategic choice and both end up in itsworst possible outcome. The assumptions are: 1.) both player are rational andeach player knows that all the other players are rational, meaning that bothchoose their strategy according to the highest payoffs or utilities, and 2.)both know the payoffs (at least the order of payoffs<span Times New Roman",«serif»;mso-fareast-font-family:SimSun;mso-ansi-language: EN-GB;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA">[i])and both know that the opponent knows it as well.

For instance, twocountries (X, Y) have to choose their emission target simultaneously with thegiven payoffs in Table 1:<span Times New Roman",«serif»;mso-fareast-font-family:SimSun;mso-ansi-language: EN-GB;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA">[ii]     

                                    Table1: Transnational Cooperation Dilemma







(1, 1)

(-1, 2)


(2, -1)

(0, 0)


Without knowing what the other country ischoosing (imperfect information) country X will choose pollute because 2 > 1and 0 > -1. Respectively, country Y will also choose pollute because it isits rational choice. The dilemma is that both end up in a unique Nashequilibrium with the payoff nil.

            ThePD is evident in many real life situations, for instance price setting within acartel or an alliance. ‘Business is cooperation when it comes to creating a pieand competition when it comes to dividing it up’<span Times New Roman",«serif»;mso-fareast-font-family:SimSun;mso-ansi-language: EN-GB;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA">[iii],but what governs the balance between cooperation and competition? For example,the production decision of two members (<st1:country-region w:st=«on»>Iran</st1:country-region>and <st1:country-region w:st=«on»><st1:place w:st=«on»>Iraq</st1:place></st1:country-region>)of the OPEC<span Times New Roman",«serif»;mso-fareast-font-family:SimSun;mso-ansi-language: EN-GB;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA">[iv]

illustrates a prisoners’ dilemma. Both can choose between two productionlevels, either 2 or 4 million barrels of crude oil a day. The profits (measuredin millions of dollars per day) are shown in Table 2:

Table 2: Table of Profits (<st1:country-region w:st=«on»>Iran</st1:country-region>,<st1:country-region w:st=«on»><st1:place w:st=«on»>Iraq</st1:place></st1:country-region>)

Iran’s Output

Iraq’s Output




(46, 42)

(26, 44)


(52, 22)

(32, 24)

Again, they have to decide simultaneouslywithout knowing what the other is choosing. Both countries have a dominantstrategy: both want to produce at the highest level of profits. Both end up byproducing 4 million barrels and earn respectively $32 and $24 million dollarper day. The problem is to find a way where both produce at lower levels withhigh prices and hence highest profits, given the temptation of cheating andgaining at the expense of the other.

The major reason why aprisoners’ dilemma exists is the lack of information exchange about the otherplayer’s actions. This problem can take various forms, which could beclassified in two groups. First, the lack of communication preconditioned bythe rules of the game. In the classical Tchaikovsky case the two prisonerscould notobtain the information because theywere separated by physical boundaries of the cells. Secondly, it is thecompetitive nature of the players, which is not necessarily preconditioned bythe rules of the game. In the case of <st1:country-region w:st=«on»>Iraq</st1:country-region>and <st1:country-region w:st=«on»><st1:place w:st=«on»>Iran</st1:place></st1:country-region>,the two countries could cooperate, but the self-interest of the two playersdoes not allow them to achieve the best outcome. The applications of such asetting can be observed in business competition as well. The dilemma can alsobe viewed from an interpersonal prospective. There is experimental evidence ofhow people behave and interact in a situation that potentially leads to aprisoners’ dilemma.<span Times New Roman",«serif»; mso-fareast-font-family:SimSun;mso-ansi-language:EN-GB;mso-fareast-language: ZH-CN;mso-bidi-language:AR-SA">[v]Scientists have distinguished two types of personalities that determine theoutcome of repeated games: cooperative and competitive ones. In other words,the propensity of a person in a group to cooperate or to compete determines theoutcome of the game. In sum, to avoid being trapped in a prisoners’ dilemmacooperation and/or exchange of information is the most crucial element.

However, rules of thegame might be that cooperation is not possible (the players meet just once).What makes it possible for cooperation to emerge is that players might meetagain (iterated PD) and do not know the end of the game. That means today’schoice not only influences the outcome today, but can also influence theplayers’ choices later. Now, trust matters and the path to success is to findpatterns of cooperation based on reciprocity.<span Times New Roman",«serif»;mso-fareast-font-family:SimSun;mso-ansi-language: EN-GB;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA">[vi]

Should the prisoners’dilemma be resolved or not? Some would like to see it resolved others not. Inthe case of law enforcement agencies that are working against corruption onecan say that a prisoners’ dilemma should not be resolved. In the sense,criminals should not have the chance to cooperate under interrogation. They mayagree not to confess and that would make it very difficult to prove that theyare guilty. In fact, many mafia families pursue a rule, which says not tocollaborate with the police at all.

Now, when we look at competitionof airlines or any other industry it is clear that alliances or any other formof organizations can allow a few companies to make extraordinary high profitswhile the result for customers can be higher prices. From the customers’ pointof view it would be better when there is no communication between majorproducers and retailers.

The PD, a conflictbetween collective interests and individual interests, in a contemporary worldis often the dilemma of the interests of a small group of business owners overthe society as a whole.<span Times New Roman",«serif»;mso-fareast-font-family:SimSun;mso-ansi-language: EN-GB;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA">[vii] 

In the resolution of the dilemmawe look at short-term scope. Decision making in the model usually involvesshort term or immediate thinking. Whereas in real world situations companiesthat are involved in artificial price agreements risk losing reputational-capital.The same applies to examples of law enforcement agencies and the mafia. Inconsideration of long term prospective, members will not confess because ifthey would end up with a ‘light’ sentence the family may announce their ownsentence, while going to prison can be guarantee of a respectful lifeafterwards.

The PD explainsstraightforward why business, politics and everyday life situations end up inits worst possible outcome when players are trapped in a simultaneous-movegame. Under the assumption of the PD there is even not a loophole out of thedilemma. By repeating the game trust is going to be crucial to reach a betteroutcome. Nevertheless, there is no best strategy because it depends upon whatthe other player is likely to do and what he expects the other player is doing.In real life situations PD should not always be resolved, and in fact oftenbest effort should be made not to allow coordination and collaboration.

<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»;mso-ansi-language: EN-US;mso-fareast-language:DE;mso-bidi-language:AR-SA">[i]

Axelrod, R. (1984), The Evolution of Cooperation, p. 17

<span Arial Unicode MS""><span Times New Roman",«serif»; mso-fareast-font-family:«Arial Unicode MS»;mso-ansi-language:EN-US;mso-fareast-language: DE;mso-bidi-language:AR-SA">[ii]

Barret, S. (2003), Environment and Statecraft – The Strategy ofEnvironmental Treaty-making, Oxford University Press, pp. 53-54

<span Arial Unicode MS""><span Times New Roman",«serif»; mso-fareast-font-family:«Arial Unicode MS»;mso-ansi-language:EN-US;mso-fareast-language: DE;mso-bidi-language:AR-SA">[iii]

<st1:State w:st=«on»>Brandenburg</st1:State>, Adam M. and Barry J.Nalebuff (1996), <st1:place w:st=«on»><st1:City w:st=«on»>Co-opetition</st1:City>, <st1:State w:st=«on»>New York</st1:State></st1:place>, p.4

<span Arial Unicode MS""><span Times New Roman",«serif»; mso-fareast-font-family:«Arial Unicode MS»;mso-ansi-language:EN-US;mso-fareast-language: DE;mso-bidi-language:AR-SA">[iv]

Organization of Petroleum Exporting Countries (OPEC), example fromDixit, Avinash K. and Barry J. Nalebuff (1991), Thinking Strategically, TheCompetitive Edge in Business, Politics and Everyday Life, W. W. Norton &Company, New York, p. 90

<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»;mso-ansi-language: EN-US;mso-fareast-language:DE;mso-bidi-language:AR-SA">[v]

Andreoni, J. and J.H Miller (1993), ‘Rational Cooperation in theFinitely Repeated Prisoner’s Dilemma: Experimental Evidence’, The EconomicJournal, (103), 418, 576-577

<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»;mso-ansi-language: EN-US;mso-fareast-language:DE;mso-bidi-language:AR-SA">[vi]

Axelrod, R. (1984), p. 33

<span Times New Roman",«serif»;mso-fareast-font-family:SimSun;mso-ansi-language: EN-GB;mso-fareast-language:ZH-CN;mso-bidi-language:AR-SA">[vii]

Heylighen, F. (1995), The Prisoners'Dilemma, Principia Cybernetica Web, 1995, http://pespmc1.vub.ac.be/PRISDIL.html,assessed: 5.11.04 at 18:30 and Heylighen F. (1992): "<img src="/cache/referats/24412/image001.gif" v:shapes="_x0000_i1025">Evolution, Selfishness and Cooperation",Journal of Ideas, Vol 2, # 4, pp 70-76.