Prisoner's Dilemma with Numerical Example. Economics Essay

Prisoner’s Dilemma
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Prisoner’s Dilemma
The prisoner’s dilemma is a game theory paradox that examines how individuals make decisions that are aimed at serving their own personal interests. It is essential to note that the prisoner’s dilemma game shows how players are likely to interact and by understanding their motives and strategies. This game demonstrates how even the best strategies implemented may facilitate worse results in non-cooperative situations. Critically, this game may have crucial implications in real-life situations, such as pricing strategies that are implemented by different organizations. The literature analyzes and examines how a prisoner’s dilemma may be used in making decisions.
The prisoner’s dilemma game features two players who are arrested after committing a crime, and they are placed in different rooms where they are not in a position to communicate with each other; these means that they cannot conspire of cooperate. Every individual is required to state whether he is willing to confess or stay quiet. Since there are two individuals, each with two possible options, the game will have four likely outcomes (Froeb, McCann, Ward & Shor, 2017). When the two individuals confess, they will be sentenced. If one of the players disown the other, he is given a shorter term than the other. In case one of the players confess while the other declines, the one who confesses is let free while the other is punished severely. However, if both players choose to remain quiet, they are both punished less severely than they would if they both confessed.
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