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What is the 'Prisoner's Dilemma'

The prisoner's dilemma is a paradox in decision analysis in which two individuals acting in their own self-interests do not result in the optimal outcome. The typical prisoner's dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process.

BREAKING DOWN 'Prisoner's Dilemma'

Stated simply, the prisoner's dilemma stipulates that personal interest seems more desirable, but it often leads to a worse result if two parties are both acting in self-interest.

Example of the Prisoner's Dilemma

Suppose, for example, that 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 sentences, and both of them face the same scenario. Dave is first given the option of pleading guilty or not guilty. If Dave pleads guilty, Henry can plead not guilty and get a two-year sentence, or Dave can plead guilty and receive a one-year sentence. It is in Henry's best interest to plead guilty if Dave pleads not guilty.

Conversely, if Dave pleads not guilty, Henry can either plead not guilty and receive a five-year sentence, or Henry can plead guilty and receive a three-year sentence. It is in Henry's best interest to plead guilty if Dave pleads not guilty. However, in both situations, Henry's natural tendency is to act in self-interest and plead not guilty.

Dave faces the same decision matrix and follows the same logic as Henry, acting in self-interest. As a result, both parties plead not guilty and receive multiple years in jail. If they had cooperated, they could have served only one year. A true prisoner's dilemma is typically played only once, or else it is classified as an iterated prisoner's dilemma.

Brexit and the Prisoner's Dilemma

As of June 24, 2016, Britain and the European Union face a real-world prisoner's dilemma. Britain's decision to leave the EU by invoking Article 50 means that the country has a two-year period to negotiate its economic and political relationship with the EU. As is expected, both sides are keeping self-interests in mind when approaching the negotiating table.

For example, Britain seeks to obtain the advantages of the EU's single market with none of the potential costs. Meanwhile, the EU has called for consequences in regards Britain's exit vote, wanting to make an example for any other country thinking of leaving. However, if both sides decide to work together to come to an agreement that is mutually beneficial, the prisoner's dilemma can be circumvented and both sides can prosper. If both sides hold fast to personal interests, neither side benefits; it becomes a zero-sum game.

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