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Prisoner's Dilemma


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Prisoner's Dilemma is a canonical example of a game analyzed in game theory that shows why two individuals might not cooperate, even if it appears that it is in their best interests to do so. The presentation takes you through various rounds of the game played at a business school.

Published in: Business
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Prisoner's Dilemma

  1. 1. The Team Mona Siddharth R SumedhaSharma Sharma Robin Agarwal Vivek Mehta
  2. 2. Agenda• Case Background• End Result• Strategies• Key Takeaways• Learning applications• Game Theory
  3. 3. Background• The prisoners’ dilemma is the best-known game of strategy in social science• It helps us understand what governs the balance between cooperation and competition in business, in politics, and in social settings.• The concept of the prisoners’ dilemma was developed by RAND Corporation scientists Merrill Flood and Melvin Dresher and was formalized by Albert W. Tucker, a Princeton mathematician.
  4. 4. Rules of the game
  5. 5. The Thought ProcessInterpretation & PsychologyDifferent Interpretations Different Objective Definitions3 primary issues at handi.Freedomii.Beat the other teamiii.Partners vs Competitors
  6. 6. End Result
  7. 7. Clash of Objectives
  8. 8. Incentive Break-up Group 4 Don`t Confess ConfessGroup 3 Don`t 3,3 -6,6 Group 4 Confess Contribute Behave Confess 6,-6 -3,-3 to common Badly good Contribute Group 3 to common 3,3 -6,6 good Behave 6,-6 -3,-3 badly
  9. 9. Strategy AnalysisRound Group 3 Group 4 Strategy Reason If we had chosen " not confessed" . There were chances of 1 NC -6 C 6 Confessed heavy penalty We wanted to increase the gap between both the teams and 2 NC -6 C 6 Confessed maintain our positive balance Since the strategy was working for us and keeping us in 3 NC -6 C 6 Confessed positive. So we stuck to "confession" We were sure that they would go for confession and if we 4 C -3 C -3 Confessed chose A we would get heavy penalty We got the other teams signal but the stakes were even 5 C -6 C -6 Confessed higher than last round.we stuck to our strategy of confessing
  10. 10. Strategy AnalysisRound Group 3 Group 4 Strategy Reason We got two negative scoring in the last rounds.we didn’t go 6 NC -6 C 6 Confessed for "No confession"because if the other team had confess we would have lost 6 points and got down to just 3 We were sure that the other team will go for Y keeping in 7 NC -6 C 6 Confessed mind the last game.we wanted to play safe. Keeping last two rounds in minds.we expected group 3 to 8 C -9 C -9 Confessed chose Y and to minimize our losses we chose B again 9 NC -36 C 36 Confessed The stakes were very high in the last 2 rounds and it was too late to cooperate with the other team as we couldnt send signals and expect them to understand it. Therefore the team 10 NC -36 C 36 Confessed stuck to its option of B Group 3 Group 4 Total -120 84
  11. 11. Key Takeaways• More efforts into defining objectives• Defining precisely the allies and competitors• Understanding the implicit signals from the external party• Different strategy for different positioning• Strategy should be adaptable according to changing environment• Playing safe always doesn’t help• Don’t take any information on face-value
  12. 12. Learning Applications Not Adopt Adopt• The VISA check card • Business choice and payoff in black Adopt 1,1 -1,0 • Customer`s choice and payoff in blue Not 0,-1 0,0 Adopt
  13. 13. Learning Applications Student 1 Not study StudyStudent 2 Not study A,A D,A Study A,D C,C
  14. 14. Thank You