The prisoners dilemma is familiar to any student of game theory. One of its appealing properties is its seeming simplicity - there is an 'obvious' way to play the game. What is obvious in theory does not, however, always show up in reality. So, does that mean people are dumb or the theory is dumb? The conventional approach seems to be to say that people are dumb. But, I think its the theory that needs a rethink. Here is one reason why: The table below gives an example of the prisoners dilemma. Alice and Barney are two work colleagues who have to produce a project together. If they cooperate they will finish the project in one hour. If they do not cooperate it will take them 10 hours. If Barney cooperates and Alice defects then Alice gets away with doing nothing while Barney spends 15 hours. Vice versa if Alice cooperates and Barney defects. So, what should Alice do? If Barney cooperates then...
Some random thoughts on game theory, behavioural economics, and human behaviour