Prisoner’s Dilemma

It is a prototypical example for the enthusiast of game theory. Now let’s deep dive into the dilemma.

Two prisoners Alice and Bob are accused for committing a crime let say, for robbing a bank. Both are interrogated separately and given the following deal.

If one of them confesses and the other one remains silent then the confessor will get no punishment and the other one will get harsh penalty.(10 years in prison, cumulatively 0+10=10 years)

Let’s see the hidden part of the deal what happens if both choose to confess or none of them choose to confess.

If both choose to confess, they won’t get that harsh penalty but cumulatively(7+7=14 years), they wouldn’t spend longer time in jail. If none of them choose to confess, they would spend the least time cumulatively (4+4=8 years).

Being a rationale person most of the people will end up going for deal. However, as we see from the above scenarios last one is the best one for both.

Let’s see how this quandary is applied in business world. For simplicity, let’s take the example of the great Indian telecommunication market.

After the entrance of Jio to the market, other players had to decrease the prices as they were losing their market share. Relating it to the dilemma, it’s the initial deal. As the competitors had to slash the prices, ultimately taking a tank at the profit. In the present scenario, it has reached to the point where none of them is slashing prices anymore. All of them increases the prices, its a win-win for the industry. All the players are cooperating among themselves.

The same example can be seen for any other industries like in carbonated drink we see Coke and Pepsi pricing in the same lines. Recently, we saw war in the oil prices, which led it to negative prices for the first time. Finally, there was an agreement among the OPEC+ nations to decrease the supply and thereby pump the prices.

What will you choose to do in such a dilemma?

You can play this game here to figure out the answer for you. One of my close friends recommended to me recently. I enjoyed playing it. It may take around 30 minutes of your precious time, but it is worth it.