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Economics 101: Prisoners' Dilemma | SterlingTerrell.net

Economics 101: Prisoners' Dilemma

 

What is prisoners' dilemma?

Prisoners' Dilemma is the standard example of game theory.

Two robbers are arrested and questioned by the police.
Should they both confess?

What if one confesses and the other does not?
  • If they both rat each other out, both will serve 10 years in prison.
  • If one rats and the other is silent, the former will be released, the later will serve 20 years in prison.
  • If both remain silent, both will serve 2 years in prison.

Turns out, the Nash Equilibrium - and the way they both stay out of jail - is if both keep their mouth shut.