Game Theory 101: The Prisoner's Dilemma & Iterated Prisoner’s Dilemma Game Simulation

The prisoner’s dilemma is a popular introductory example of a game analyzed in game theory that demonstrates why “rational” individuals are unlikely to cooperate, even when it could be in both of their best interests to do so, a win-win scenario. The two prisoners dilemmas below simulate both what we’ll call the classical example, two prisoners being interrogated, and an iterated model that’s been applied to the population of a species. (you could apply this same thinking to a firm or any number of situations, but this feels like the most palpable example)

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Classical Prisoner's Dilemma Game Simulation

The traditional prisoners dilemma works as follows, you and your accomplice get caught committing a crime. The police interrogate you separately. Before you’re carted off, you promise not to snitch on each otehr.

Over the course of the "interogations" by police the following things can happen:

Play how you want to, and see what happens:

Source: Prisoner’s Dilemma by Jana Vembunarayanan

How to play this Single Move Prisoner's Dilemma Game Simulation:

   

-Always Confess - Confess in Every Round
-Always Remain Silent - Never Cooperate With Investigators
-Tit For Tat - Always Copy Opponents Last Choice
-Pavlovian - Share If Last Choice Was Good For You
-Grudge Holder - Share Until Opponent Confesses, Then Never Again
-Optimistic Peace Maker - Share, unless opponent confesses, then stay silent if they do for two rounds
-Pessamistic Peace Maker - Confess, unless competitor stays silent for two rounds.
-Random - Random Every Round

  Click on the question mark to the left to learn more about playing styles, then hoose your ideal playing style on the dropdowns below.

"Single Move" Game Simulation

Round: 0

Prisoner 1 Years: 0

Choice:

Prisoner 1 in Prisoner Dilemma

Prisoner 2 Years: 0

Choice:


In a multiple-moves Prisoner's Dilemma game you can play against the same partner many times. This simulates mutualistic interactions in social groups where individuals will frequently encounter each other. An example of cooperative behaviour which appears to be a multiple-moves game is mutual grooming for parasites, which many animals do, including chimpanzees.

What is The Prisoner’s Dilemma?

On a one term basis this applies to any social situation that might be out there, like cooperation with your friends to see who shares things, or on teams (have you ever been on a group project where someone just takes credit for you work? (that is a non-cooperative outcome)

TL;DR:

Why I Actually Hate the Traditional Prisoners Dilemma

1) You have no preplanning with the other player, and no way to communicate.

2) The best and second best outcomes can occur if you do snitch.

3) The worst outcome will happen to the person who doesn’t snitch.

But if the DA has no case if no one snitches, then the best outcome is for each person is to always cooperate, and never snitch. But people usually do, since you have no guarantee at the end of the day as to what will happen.

Iterated Prisoner's Dilemma Applications in the Market:

Monopolistic Competition Explaination:

Price Competition, Collusion, Cartels, & Adam Smith

Without collusion prices will be continually driven down, in what Adam Smith described as competeing away profits. As you can imagine a market, cooperating with the police is essentially equivalent to cutting your prices. You're likely to see significant top line revenue growth if you can cut prices and the competition can't. But once they do so the competition does as well. As you could imagine this type of competition which is quite commone eventually leads to a situation in industries where only a few firms are able to compete and capute any value.

Source: “To Much of a Good Thing” by The Economist.

Sidebar:

While we’ll always be bound to our mission of extending the knowledge of marketing tactics and theory. iD Marketing Tools is also bound to cover the topics of game theory for marketers, strategic dominance, and machine learning.

Background to the Evolution of Cooperation

Social behaviour Animals who live in groups have evolved social behaviours such as cooperative hunting and predator defense. These hyaenas have hunted together to capture their prey. An especially interesting form of cooperative behaviour is called "altruism" where it costs the individual performing the behaviour and benefits the recipient. Such "charitable" behaviour appears to go against Darwinian notions of evolution by natural selection on individual success, since cooperation should only evolve if the individual gets more out of it than they put in. Kin selection Examples of apparent altruistic behaviour, such as the worker bees that forfit their chance to breed to help the queen raise more sisters were once explained as acts for "the good of the species". These so-called "group selection" arguments have generally not been supported, and instead kin selection is invoked. W.D. Hamilton reasoned that "individual success" should be thought of in terms of passing on genes to the next generation not simply in direct descendants but also in relatives who share the same genes. By helping a relative you are helping your own fitness. Reciprocal altruism Kin selection likely explains much cooperation in social groups but what about apparent cooperation between unrelated individuals, such as between species? An example of these mutualisms is this wrasse fish which picks skin parasites off other fish. Typically the fish are large enough to eat the wrasse but instead they sit quietly and allow it to clean their skin. R.L. Trivers proposed that in these cases, individuals behave altruistically to another individual in the expectation that they in turn will reciprocate the favour and be altruistic to them. Game theory In interactions where there is a delay between reciprocating, then individuals can cheat and not reciprocate the altruistic act. Individuals are actually playing a game, and game theory can be used to model the possible moves and outcomes. In game theory, cooperative behaviours such as the cleaner fish behaviour is called a non-zero-sum game; both individuals have a shared interest of survival. By contrast, ice hockey or predator-prey interactions, where one wins at the expense of the other, is a zero-sum game.

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