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Prisoner’s dilemma: Difference between revisions
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{{a|glossary|}} | {{a|glossary|}}{{a|risk|}}{{risk|Trust}}ing is a risky strategy. Generally one side doesn’t survive. How can {{risk|trust}} survive? | ||
An exercise in calculating economic outcomes by means of {{tag|metaphor}}, the [[prisoner’s dilemma]] was developed at the RAND corporation in the 1950s by those splendid brainboxes as a way of predicting individuals’ behaviour in situations requiring [[I believe|trust]] among strangers - for very good example, when unacquainted participants buy or sell in an unregulated market. This field developed into [[game theory]]. | An exercise in calculating economic outcomes by means of {{tag|metaphor}}, the [[prisoner’s dilemma]] was developed at the RAND corporation in the 1950s by those splendid brainboxes as a way of predicting individuals’ behaviour in situations requiring [[I believe|trust]] among strangers - for very good example, when unacquainted participants buy or sell in an unregulated market. This field developed into [[game theory]]. | ||
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**The buyer is in its original position (£0). | **The buyer is in its original position (£0). | ||
===Single round=== | ===Single round prisoner’s dilemma=== | ||
If you play | If you play the game once, and in isolation — with someone you don’t know and whom you do not expect to meet again, the payoff is grim: those who cooperate will get ''reamed''. Cooperation is a bad strategy. Your best interest is in defecting on the other guy, because ''his'' best interest is defecting on ''you''. | ||
This looks like a bad outcome for commerce | This looks like a bad outcome for commerce: if [[homo economicus]] ''should'' weasel on every deal, how can we have any faith in the market? How, come to think of it, has any kind of market ever got off the ground? Why would anyone take on a sure fire losing bet? Is this the smoking gun that homo economicus doesn’t exist?<ref>No. [[Homo economicus]] ''doesn’t'' exist, but this is not the reason why.</ref> | ||
Because trust, faith and confidence changes everything. The single round prisoner’s dilemma stipulates there is ''no consequence'' on a bad actor for reneging. The defector is guaranteed to get away with it: these are the rules. | Because [[trust]], faith and confidence changes everything. The [[single round prisoner’s dilemma]] stipulates there is ''no consequence'' on a bad actor for reneging. The defector is guaranteed to get away with it: these are the rules. | ||
But in real life, one-off interactions with strangers — counterparts whom you are | But in real life, one-off interactions with strangers — counterparts whom you are certain never to see again — are extremely rare, especially in our interconnected age. Business is the process of cultivating relationships. Establishing [[trust]]. | ||
The game theorists found an easy way to replicate that concept of trust: run the same game again. Repeatedly. An indefinite amount of times. | The game theorists found an easy way to replicate that concept of trust: run the same game again. Repeatedly. An indefinite amount of times. This is the [[iterated prisoner’s dilemma]]. | ||
=== | ===[[Iterated prisoner’s dilemma]]=== | ||
The same actors get to observe how each other act, and respond accordingly. If your counterpart defects, you have a means of retaliating: by defecting on the next game, or by refusing to play the game any more with that counterparty. | The same actors get to observe how each other act, and respond accordingly. If your counterpart defects, you have a means of retaliating: by defecting on the next game, or by refusing to play the game any more with that counterparty. | ||
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{{seealso}} | {{seealso}} | ||
*[[Agency problem]] | |||
*[[I believe]] | *[[I believe]] | ||
{{ref}} | {{ref}} | ||
{{draft}} | {{draft}} | ||