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. Diner's Dilemma

    A game-theory situation with several players. Similar to a prisoner's ...
  4. Pareto Efficiency

    An economic state where resources are allocated in the most efficient ...
  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 Articles
  1. Understanding Investor Behavior
    Active Trading Fundamentals

    Understanding Investor Behavior

  2. An Introduction To Consensus Indicators ...
    Active Trading Fundamentals

    An Introduction To Consensus Indicators ...

  3. Game Theory: Beyond The Basics
    Options & Futures

    Game Theory: Beyond The Basics

  4. The Basics Of Game Theory
    Fundamental Analysis

    The Basics Of Game Theory

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center