Question

In business, strategic situations like the advertising game presented are not played once --- the firms evaluate their strategies periodically and can repeat these games for many months, quarters, or years into the indefinite future. Even for relatively simple games like those presented in this chapter (e.g., two players with two possible actions), the Nash equilibria for infinitely repeated games are very difficult to derive analytically. Economists have used numerical tools to simulation the outcomes from different strategies that the players may use, and the best strategy seems to be the "tit-for-tat" rule in which a firm cooperates with the other firm until the competitor deviates. After one firm deviates from cooperation, the other firm switches its behavior to non-cooperative actions until the deviating firm returns to cooperation. As such, firms are rewarded for cooperation and punished for deviation. Our personal relationships may also be examined in a repeated game framework. Of course, the payoffs in these situations do not always involve money and may include good feelings for favors done or bad feelings for hurtful actions. Does it make sense to use the "tit-for-tat" rule when dealing with personal friends and family members? If not, what is different about these personal relationships? Please explain your responses.

Answer 1

Tit for Tat Strategy is greatly enhanced by including an element of forgiveness. In absence of which, it can encourage a vengeful cycle of each other person.

For example, if two people has to make some mutual decision. There are many alternatives. If they take the decision mutually, with taking consideration of other person it may be benificial or harmful for both of them. if they take the individual decision by thinking of their self interest, one of them will get affected or hurt and another person may get benefited. It all depends what choice we make in such situation.

As per human tendecy, we consciously decides for our self interest as it is your inborn right to safeguard your interest. But in personal relation you're intent of persuing your own advantage, might it not make sense to disregard your parterner preferences, and not being so cooperative with them.

Relationships are not limited to the single engagment. So Tit for Tat will work in personal relations also but in a passive way. we should think about other's self interest too before coming to any mutual decision. so that going forward they can remember how other person acted or reacted previously and then they will also be mindful of their present reaction may affect the other person or his or her self interest. So here the important strategy is the trust. Less selfless tactic is the rule to use the tit for tat in a passive way. if you cooperate, the other person will cooperate, if you do not cooperate or detect, the other person will act against it. So while dealing with person relations,

one should use the Tit for tat in a passive way. Becauses the Tit for tat with positive way includes the innocent participants provides a second chance to other person to cooperate.