The Lesson From the Prisoner’s Dilemma Is Cooperation and Truthfulness

In the real world cooperation is not a terrible choice

Game theory, invented by John von Neumann and Oskar Morgenstern, tries to model and understand pragmatic human behavior through social interactions. Because we live in a competitive world, it is hard to marry our proclivity to cooperate or compete. In the Game theory, outcomes depend on the actions of other players. This depicts the actual world because the interference of other people in our community influences virtually all of what we do.

Prisoner’s dilemma, an example of game theory, demonstrates a scenario where cooperation is a terrible choice. We would see how cooperation is actually not a terrible choice in the real world.

Here is the prisoner’s dilemma.

Two suspected criminals, James and John, were apprehended for petty theft and in custody. The prosecutor suspects James and John may be responsible for last week’s armed robbery, where a man got shot and killed. But he has no evidence of his suspicion. The prosecutor has to get James and John to confess to the robbery and killing. To do that, the prosecutor gives them some options with trade-offs.

James is taken to another room so that he and John cannot communicate with each other. They are both asked to either confess or deny the crime, but with some caveat.

1. If James confesses to the robbery and killing, and John denies it, James will get just a year in prison while John, who denies, will get ten years in prison. Same for John.
2. If they both confess to the crime, they will both get three years in prison
3. If neither confesses to the armed robbery and killing, they will get two years for theft.

What’s the best option for James and John?

Remember, each person’s outcome depends on the choice of the other person. And there is no way of knowing the other person’s choice to confess or deny. The best outcome for both is to deny the robbery and get a 2-year sentence, but that will only be favorable if the other person confesses. Here, the best outcome for James is not the best outcome for John. And if the other person also confesses, they both get a 3-year sentence. Irrespective of the other person’s choice, the best outcome for each is to confess. Here, non-cooperation between James and John gives the best outcome.

This principle is applied in businesses and social interactions because, in both scenarios, you do not know the next move of the people you meet in a social setting or the business environment. And you might have to trade off on the best outcome for you and that of your partner while deciding.

The setup of the prisoner’s dilemma is not practical. It makes assumptions that are not conceivable in the actual world. For example, it assumes that there will be no retaliation between James and John. It also assumes James and John do not know each other well enough to make a reasonable guess what the other would pick.

In the real world, some friends may do longer sentences so that their friend would be set free or given a lesser sentence. Also, in the real world, there is a repetition of the prisoner’s dilemma, and we learn and make better decisions based on how it played out the first time. This is called the iterated prisoner’s dilemma. In the iterated prisoner’s dilemma, the optimal outcome is to cooperate and trust the other player. At least in the first round.

Take, for example, you meet a stranger, and you engage in a business transaction despite not knowing each other well enough. It is better to cooperate with the Stranger and hope he does too (assuming you are not risking too much, though). From these first interactions, you can make more reliable presumptions for future interactions.

While some people think it is better to be noncooperative until the person proves they are trustworthy, another approach is to assume people are trustworthy until they prove themselves otherwise. This works better in the actual world. If you distrust and play to your advantage in the first round, even if the person is good, he or she would learn from the first occurrence and act against his more natural principles. Nobody likes to be cheated.

The iterated prisoner’s dilemma shows that acting in your self-interest may not lead to an optimal outcome. In most life cases, cooperating always gives a better outcome for everyone. During initial interactions, there is an incentive for both parties to be noncooperative and try to get the best outcome for themselves. There is also an incentive to act honorably, which would only give a good outcome if the other party acts honorably too. However, both parties have something to lose when they do not cooperate.

Like it is said, you can only fool some people sometimes, you cannot fool everybody all the time. If you have proven yourself not to be trustworthy, you lose social standing and inevitably will not be accepted into society.