Tit For Tat

AAA

DEFINITION of 'Tit For Tat'

A game-theory mechanism which is subject to a payoff matrix similar to that of a prisoner's dilemma. Tit for tat was introduced by Robert Axelrod, who developed a strategy where each participant in an iterated prisoner's dilemma will follow a course of action which is consistent with their opponent's previous turn. For example, if provoked, a player will subsequently respond with retaliation, but if they are not provoked, the player will subsequently cooperate.

INVESTOPEDIA EXPLAINS 'Tit For Tat'

Tit-for-tat strategies are based on the concepts of retaliation and altruism. When faced with a prisoner's dilemma-like scenario, an individual will cooperate when the other member has an immediate history of cooperating and will default when the counterparty previously defaulted.
This concept is often applied to economics and biology.

RELATED TERMS
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s ...
  2. Iterated Prisoner's Dilemma

    A normal prisoner's dilemma played repeatedly by the same participants. ...
  3. Pareto Efficiency

    An economic state where resources are allocated in the most efficient ...
  4. Diner's Dilemma

    A game-theory situation with several players. Similar to a prisoner's ...
  5. Prisoner's Dilemma

    A paradox in decision analysis in which two individuals acting ...
  6. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
RELATED FAQS
  1. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  2. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
  3. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  4. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  5. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
  6. How does the landscape of the telecommunications sector in the U.S. compare to Canada?

    From a global perspective, there are more similarities than differences between the telecommunications sectors in the United ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Understanding Investor Behavior

    Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?
  2. Active Trading Fundamentals

    An Introduction To Consensus Indicators

    Learn how the herd is almost always wrong, or at least late in jumping on the bandwagon.
  3. Options & Futures

    Game Theory: Beyond The Basics

    Take your game theory knowledge to the next level by learning about simultaneous games and the Nash Equilibrium.
  4. Fundamental Analysis

    The Basics Of Game Theory

    Break down and examine the potential consequences of economic/financial scenarios.
  5. Active Trading Fundamentals

    Behavioral Finance

    Learn the science behind irrational decision making and how you can avoid it.
  6. Economics

    What Does Inferior Good Mean?

    The term “inferior good” does not describe a lack of quality, but rather, is an economic term used when discussing elasticity of demand for a good.
  7. Economics

    What Is a Giffen Good?

    A Giffen good is a product whose demand increases as its price increases, and falls when its price falls.
  8. Economics

    Do Transport Stocks Signal a U.S. Selloff?

    The Dow Jones Transportation Average index has underperformed the broader DJ Industrials Average, leading some market watchers to speculate a selloff.
  9. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.
  10. Investing Basics

    Explaining Counterparty Risk

    Counterparty risk is the risk that the other party in an agreement will default, or fail to live up to its contractual obligation.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!