In the prisoner's dilemma game (watch the video on the youtube, there are plenty of versions...

In the prisoner's dilemma game (watch the video on the youtube, there are plenty of versions of this video available on the Internet), why prisoner's chose to settle for their second best option (they could do better that what most likely would occur). Please explain.

Expert Solution

Suppose, in a prisonner's dilemma game, if both tell the truth then they receive a sentence for 5 years, if both lie and do not accept their mistake then both receive a sentence for 1 year, if one of them lies and the other tells the truth, one teling the truth is acquitted and the one lying receives the sentence of 12 years.So, the Nash equillibrium here is both receiving 5 years of sentence, although this is the second best outcome to collusion, where they would receive 1,1 year each, yet prisonners settle for this option because if they collude and lie, then both know that they have an incentive of getting acquitted by telling the truth if the other is lying and if the other is cheating and telling the truth then agaib telling the truth would be the better option, so in both the cases the best outcome for a player is to tell the truth.So both, instead of lying(due to mistrust and extra incentive of getting acquitted) end up telling the truth which automatically leads to the second best outcome of a sentence of 5 years each.

Rahul Sunny answered 1 year ago

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