What is 'Tit For Tat'

Tit for tat is a game theory mechanism 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 follows a course of action consistent with his opponent's previous turn. For example, if provoked, a player subsequently responds with retaliation, but if he is not provoked, the player cooperates.

BREAKING DOWN 'Tit For Tat'

Tit for tat is a strategy that can be implemented in games with repeated moves or a series of similar games. The concept revolves around game theory, an economic framework that explains how humans interact with each other in competitive environments. There are two types of game theory: cooperative game theory and uncooperative game theory.

Tit for tat states that a person is more successful in game theory if he cooperates with another person. Implementing a tit for tat strategy occurs when one person, or agent, cooperates in the very first interaction with another agent, and then mimics that agent's proceeding moves. The idea is a person can reward another with good behavior so he reciprocates with good behavior. This strategy is based on the concepts of retaliation and altruism. When faced with a dilemma, an individual cooperates when another member has an immediate history of cooperating and defaults when the counterparty previously defaulted.

Prisoner's Dilemma and the Use of a Tit for Tat Strategy

The prisoner's dilemma is a famous economic scenario used to explain the often qualitative field of social science. It helps show people the balance between cooperation and competition in business, politics and general social settings. The game is played by "arresting" two individuals and giving them a dilemma. If both confess, they serve five years in jail. If one confesses and one does not, the one who does not confess serves seven years and the one who confesses gets off for free. If, however, both agents do not confess, they both serve three years. The tit for tat strategy is to start with cooperation and not confess, assuming the other agent follows suit.

For example, two competing economies can use a tit for tat strategy so both parties benefit. One economy starts with cooperation by not imposing import tariffs on the other economy's goods and services to induce good behavior. The idea is the second economy responds by also choosing not to impose import tariffs. If, however, the second economy reacts by taking advantage and implementing tariffs, the first economy retaliates by implementing tariffs of its own to discourage the behavior.

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