Diner's Dilemma

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.

Investopedia explains '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.



comments powered by Disqus
Hot Definitions
  1. Gross Debt Service Ratio - GDS

    A debt service measure that financial lenders use as a rule of thumb to give a preliminary assessment about whether a potential borrower is already in too much debt. Receiving a ratio of less than 30% means that the potential borrower has an acceptable level of debt.
  2. Federal Reserve Note

    The most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand.
  3. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  4. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  5. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  6. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
Trading Center