Wednesday 18 June 2008

the prisoners dilemna

Hi,

This is a famous dilemma, invented by Albert Tucker, shows the paradox between self-interest and working for a mutual benefit. It goes thus:

A policeman arrests two suspects and puts them in separate cells and confesses to them that he has no evidence against them. Instead he offers them a few alternatives; If one confesses, then he will go free whilst the other will get a 10 year sentence. If both confess, then they will get a lighter punishment of 7 years. If neither confesses, then both go to prison for 1 year on trumped up charges.

The prisoner deduces the following: If his partner confesses, then he gets 7 years if he too confesses or 10 years if he remains silent. If his partner doesn't confess, then he goes free if he confesses, whilst going to prison for a year if he doesn't confess. Whatever his partner does, it is better for him if he confesses, so he does. They both go to prison for 7 years.

The dilemma seems an innocuous at first glance, but its results are significant. as John Kay (Economist and author) puts it "The self-interested benefits of cooperation are not enough to persuade the self-interested people to achieve them."

We generally work best in teams, we are genetically communal animals, with the best teams consisting of people who complement each other and have a mix of relative strengths.

This however all breaks down in the dilemma, where mutual suspicions drive people to make sure their own fate is not worse than their partners. The separate cells element is also very important as this produces information asymmetry (lack of information) for the prisoners about what their partner is doing. If they were in the same room, then chances are they would both remain silent until the last moment of the allocated time given to confess, and then confess, in an attempt to undercut each other, with the result being the same.






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LEICESTER, East Midlands, United Kingdom
Co-founder of DesignMolvi, Qur'an hafidh, graduate of Oxford University. Now blogging at www.islamicfinanceguru.com