Prisoner’s Dilemma

http://plato.stanford.edu/entries/prisoner-dilemma/
• Outcome of the Prisoner’s Dilemma
1. each player selects “dominant strategy – that which makes the person best off no matter what the other player chooses – each will opt to defect, resulting in the least socially (Pareto) optimal outcome (zero net profits)
2. Neither will have an incentive to change that is independent of the strategy choice of the other.
3. This finding suggests one which individual rational choice leads to a socially irrational outcome.
4. Generalization: If group becomes too large, it becomes extremely difficult to induce individuals to cooperate for the larger common good if they strictly seek to maximize their self-interest.
5. Cooperation is possible only if it is possible to institutionalize some way to enforce agreement among the players.