Iterated prisoner’s dilemma

The Devil’s Advocate™ →Go uptown Pay-off table A cooperates A defects B cooperates A gets 1 year B gets 1 year A goes free B gets 3 years B defects A gets 3 years B goes free A gets 2 years B gets 2 years In which the curmudgeonly old sod puts the world to rights. Index — Click ᐅ to expand: The Devil’s Advocate Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

A game of prisoner’s dilemma with a twist: You get to play the game repeatedly with the same player (crucially, in for an indeterminate number of rounds, so neither of you know at any time that there won’t be “another time”), and you can remember how the other player treated you last time. In game theory terms, this dramatically changes the payoffs. whereas in a single round, the rational best move is to defect, in an iterated game, the best move is to cooperate until the other guy defects. If she defects, defect in the next round, tit for tat.

If two prisoners start out cooperating and play this tit-for-tat game they will always cooperate. Nice, huh?

Mathematicians have worked out that the best long-term payoff comes from this tit-for-tat strategy.

Why is this interesting? Because in commerce — represented in the JC by the eBayer’s dilemma — there almost always is another time, and even when there isn't, the participants are likely not to know that.

We do remember, which is why the single round prisoner’s dilemma strategy of defecting is a bad one.

This explains why cooperation works as an evolutionary strategy.

See also

• Prisoner’s dilemma
• Agency problem