Investopedia explains 'Prisoner's Dilemma'
Suppose two friends, Dave and Henry, are suspected of committing a crime and are being interrogated in separate rooms. Both individuals want to minimize their jail sentence. Both of them face the same scenario:
Dave has the option of pleading guilty or not guilty. If he pleads not guilty, Henry can plead not guilty and get a two-year sentence, or he can plead guilty and get a one-year sentence. It is in Henry’s best interest to plead guilty if Dave pleads not guilty. If Dave pleads guilty, Henry can plead not guilty and receive a five-year sentence. Otherwise he can plead guilty and get a three-year sentence. It is in Henry’s best interest to plead guilty if Dave pleads guilty.
Dave faces the same decision matrix and follows the same logic as Henry. As a result, both parties plead guilty and spend three years in jail although through cooperation they could have served only two.
A true prisoner’s dilemma is typically "played" only once; otherwise it is classified as an iterated prisoner’s dilemma.
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