I remember talking about game theory with one of my friend. He was explaining to me about it. Beautiful Mind movie……. John Nash…….. they were the only two words I understood from his long lecture. (But I was shaking my head because he was in a mood to make me understand about game theory). But he developed enough curiosity that I came home and checked some of its basics and some case studies. The best and simple example I have just copied for you. A really good one.
Courtesy : Internet
Prisoner’s dilemma
Two criminal accomplices are arrested and interrogated separately. Each suspect can either confess with a hope of a lighter sentence (defect) or refuse to talk (cooperate). The police does not have sufficient information to convict the suspects, unless at least one of them confesses. If they cooperate, then both will be convicted to minor offense and sentenced to a month in jail. If both defect, then both will be sentenced to jail for six months. If one confesses and the other does not, then the confessor will be released immediately but the other will be sentenced to nine months in jail. The police explains these outcomes to both suspects and tells each one that the other suspect knows the deal as well. Each suspect must choose his action without knowing what the other will do. A close look at the outcomes of different choices available to the suspects reveals that regardless of what one suspect chooses, the other suspect is better off by choosing to defect. Hence, both suspects choose to defect and stay in jail for six months, opting for a clearly less desirable outcome than only a month in jail, which would be the case if both chose to cooperate.
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