DEFINITION of 'Diner's Dilemma'
A game-theory situation with several players. Similar to a prisoner's dilemma, a diner's dilemma occurs when several participants attempt to obtain the highest possible personal reward, but instead find themselves in an unfavorable situation.
The diner's dilemma is based on a situation where several people agree to split the bill before going out to eat. By following a logical course of action, every member of the group finds him- or herself ordering dishes more expensive than what they would normally buy, and they all end up facing the outcome they tried to avoid: a more expensive meal.
BREAKING DOWN 'Diner's Dilemma'
For example, prior to going out for dinner, Steve, Dave and Arthur decide that they will split the bill equally. Since the restaurant offers a wide mix of expensive and reasonably priced items, the three friends are faced with a tough decision. Arthur, who would not normally purchase the expensive items, figures that since his costs will be distributed between the other members, today he can afford to do so. Dave and Steve use the same logical reasoning. As a result, the three friends end up spending more money than they would have liked.