Question

What ways can we “free” ourselves from the trap of the Prisoners Dilemma? And in what way does your answer to the question above relate to the idea of “creditable threats?”

Answer 1

Prisoner's dilemma is a paradox in decesion analysis in which two individuals acting in their own self-interests don't produce the optimal outcome.

Following ways can be used to avoid prisoners dilemma.

* Credible threats

By introducing credible threats into the game,we can solve the problem of prisoners dilemma. Once credible threats are introduced pay off for players that don't corporate can be lowered so that there is an incentive to co-operate.

E.g) Lets consider the example of two prisoners .suppose they were members of a notorious Mafia.They know that whilst they could avoid prison sentence by betraying the other prisoner they will be punished when they get out of prison.This makes it a better option to co-operate and serve a shorter prison sentence.

Similarly assume that two players who face prisoners dilemma were members of an organization and have already signed various agreements with the organisation.Both parties Will know that if they protect choose themselves at the expense of their partner it will be a violation of agreements with the organisation and they will have to face the consequences . ( Most of the successful international cartels work like this.Members remain binded to the contracts as they know that defection will mean a series of devastating consequences for their economy including economic isolation.

* Repetition

Repeating a prisoner's dilemma will change the fame because it offers the players an option to retaliate.The threat of retaliation can be strong enough to make people co-operate.

* External enforcement.

This solution means bringing a third party that both prisoners trust .The third party must be able to convince the both players to coordinate their behaviour to get a better result.

Eg) If a pirate attempt to interrupt trade in strait of Hormuz, the US fifth fleet, a defacto external enforcer is likely to intervene even without the need to refer to a prior agreement between the pirates and targetted vessel.

All the solutions mentioned above the involve the use of threat in some manner. But there are some other solutions too.

* Rewards

Rewards can be used to change the payoffs in the game.lf there is a reward for cooperation , players themselves will have an incentive to co-operate.

*Communication

If the players are able to find a way to communicate with each other and are able to decide on a mutually beneficial strategy , then prisoner's dilemma won't exist.

But this solution has a loophole.Any prisoner will strictly want to defect once he thinks that he has convinced the other that he should co-operate.

Managed risk taking negand improved negotiations can also be effective in solving the puzzle of prisoner's dilemma.