ECON 306 Lecture 1: Econ306 The Prisoner Dilemma.docx

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21 Jan 2015
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One of the best ways to understand some basic game theory principles is to look at a classic game theory example: the prisoner"s dilemma. This game examines how two players interact based on an understanding of motives and strategies. The prisoner"s dilemma is a game that concerns two players -- both suspects in a crime. They"re arrested and brought to a police station. a. If both suspects protect each other by staying quiet (called cooperation in game theory terms), the police have only enough evidence to put each in jail for five years: however, each suspect is offered a deal. If either one confesses c. (defection from a cooperative relationship), and the other suspect doesn"t, the defector will be rewarded with freedom, while the tight-lipped suspect will get 20 years in jail. If both confess, both get 10 years in jail. It seems both players benefit most by cooperating with each other.

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