Intro to Prisoner's Dilemma (class notes)

1. History of Prisoner's Dilemma
   1. This concept was developed by a mathematician in the 1800s and was ignored for a long time.
      1. Then, a decision analyst and a psychologist wrote the book “Games and Decisions”, developing the Prisoner’s Dilemma concept.
      2. It took off in business, psychology, and decision science.
2. 90% of the people who think that they understand Prisoner’s Dilemma, don’t.
   1. It is deceptively simple
   2. you can memorize the results
   3. people can get hung up on the structure, the diagram of the decision itself
3. The Prisoner's dilemma is a way of understanding some dynamics in decision making
4. Review of Prisoner's Dilemma:
   1. The goal is to get the highest score possible
   2. We have an actor called “she”. She has a binary choice to make: she can either choose up or down.
      1. If she chooses up, she’ll get a value of 15 or 0—she doesn’t know which one.
      2. If she chooses down, she’ll get either a 20 or a 5—she doesn’t know which one.
   3. There’s a second actor, called “he” with a choice between left or right.
      1. If he chooses left, he'll get a value of 15 or 0
      2. If he chooses right, he'll get a value of 20 or 5.
   4. They choose simultaneously.
      1. If they both defect, they both get 5.
      2. If they both cooperate, they both get 15.
      3. If one defects, and the other cooperates, the one defecting gets 20, with the cooperating one getting 0.
         1. Individually Rational = Defect
         2. Collectively Optimal = Cooperate
         3. Outcome may be individually rational but collectively suboptimal
            1. Cooperation can be sustained if you have the Long Shadow of the Future
            2. If you can change the payoff structure, rules of the game, you can create cooperation

	Cooperate	Defect
Cooperate	15 \ 15	0 \ 20
Defect	20 \ 0	5 \ 5