Table of Contents

Introduction:...............................................................................................................................................2
Data Analysis:..............................................................................................................................................3
Conclusion:..................................................................................................................................................5
 Table of Figures
Figure 1........................................................................................................................................................2
Figure 2........................................................................................................................................................4
Figure 3........................................................................................................................................................4
Figure 4........................................................................................................................................................4
Figure 5........................................................................................................................................................5
Figure 6........................................................................................................................................................5
Figure 7........................................................................................................................................................5
 Prisoner’s Dilemma
Introduction:
Prisoner’s Dilemma is a game played between two persons and they have to select one option out
of two choices given to them without knowing the choice of another person. They are aware of
the consequences which is called payoff in this game. Game with certain choices and outcomes
is presented in the form of a matrix.
Player 1/ Player 2 Compete Cooperate

Compete 1,1 5, -1

Cooperate -1, 5 3, 3

Figure 1
The above matrix tells an interesting story, if both players compete, they get the payoff of 1 and
if both of them cooperate, they get a payoff of 3. In order to maximize payoff, a player needs to
be careful considering the possible combinations of choices.
Our class was asked to play the game with students turning into groups of 2 with random
classmates. We chose different choices and got different outcomes. In order to understand the
applicability of the game in real life, one needs to understand the theory behind the game. It had
two players with 2 choices at a time and the choice of one affects the outcome of the other. In
order to avoid loss and damage or to get the maximum reward, both the players compare their
choices with the possible outcomes unknowingly the other person’s Choice.
This game theory can be applied in real life as well. Let suppose there are two brands producing
the same product, say bike. If organization A decides to increase the price of its product this my
affect its sale depending upon the decision or choice made by the other brand or bike maker. In
other scenario, if the organization B decides to decrease its price, it can also affect the other
organization sale and profit depending upon their combined decision.
Let us take another real-life example, If China and US are selling the same Fighter Plane to the
world, their choices and decisions make affect the price of their strategic product. If China
decides to decrease the price of fighter plan and increase its production without knowing what
US is doing on its end, it may have consequences on the production and sale of their product
given what US decides keeping in view the possible outcome.
Prisoner’s Dilemma takes its motivation [1] from two prisoners who were caught red-handed
selling drugs by the police. Now both of them will be charged with the crime and their
confession or denial may have repercussions on their final fate.
Out of these four outcomes, both of the players need to make sure a realistic scenario to
maximize their output irrespective what another player decides to go with. In the table given
above, if player 1 decides to cooperate, ha has a chance of getting a payoff of -1 and 5 depending
on what other player decides. There is a certain kind of risk involved in choosing to cooperate,
because if the Player 2 decides to compete, player 1 will get a payoff of -1. Similarly, this
scenario is true for the player 2 as well. They both need to deliberate separately on the safest
payoff without taking a lot risk. We will discuss the outcomes of the data provided about the
classroom game.

Data Analysis:
Data can be structured to reach a meaningful outcome. In this specific game, we can make columns of
cooperation and competition and then can get an overall percentage of a certain choice adopted by
students in specific rounds. We can have an estimate of performance of students by analyzing the
strategies adopted by them and the payoff they got. We can analyze the mindset of each player by
organizing his strategy in different rounds and comparing it with the possible outcome. Details with
examples are given in the succeeding paragraphs.
We can clean data by using excel techniques. The main purpose to clean data is to avoid repetition of
entries and get the most authentic results. In classroom game, some players are playing more than one
game and adopting the same strategy, we can use them only once and compare them in both of the games
to reach a meaningful conclusion. Detailed analysis is given below;

There were total of 56 games played between different players, each game had five rounds and
two players. Following graph shows the percentage of players playing cooperation in different
rounds of the game.

Percentage of COOP in Different Rounds

5
11.61%
4
16.07% 1
33.04%

3
22.32%

2
27.68%

1 2 3 4 5

Figure 2
Following table shows the average profit of different rounds. The table depicts that round 1 has
the highest profit where Cooperate option chosen has a higher percentage. Round 5 has the
lowest profit because it has the lowest percentage of Cooperate option chosen.

Round 5 4 3 2 1
Average profit   € 1.23 € 1.32 € 1.45 € 1.55 € 1.66

Figure 3
Let’s do analysis of detailed results of 56 games being played by the students with the other students in
the class.

We will analyze the behavior of Player 14 which is playing in two games i.e game 1 and game 30. We will
analyze game 1 first which is given below;

Team/Round 5 4 3 2 1
Player 47 Cpt Cpt Cpt Coop Coop
Player 14 Cpt Cpt Cpt Cpt Cpt
Figure 4
Player 14 has the similar approach of going for competition irrespective of what another player is going
to pick. From table 1, when both players are competing, the payoff gets equalized and it has a value of 1.
Player 14 approach has a major disadvantage for player 47 when he picks to cooperate and gets a payoff
of -1.

Now we will analyze another game in which player 14 is adopting a similar sort of strategy and its matrix
of choices and payoff is given below;

Team/Round 5 4 3 2 1
Player 14 Cpt Cpt Cpt Cpt Cpt
Player 54 Cpt Cpt Cpt Cpt Coop
Figure 5
Player 14 chooses to adopt an aggressive approach and competes in all four rounds and gets the payoff
equalized most of the times.

Now we will pick a game where a player decides to go for cooperation and is not worried about the
payoff. This sort of strategy is appreciating and equally risky at the same time. Following table shows the
payoff matrix of game 13;

Team/Round 5 4 3 2 1
Player 38 Coop Coop Coop Coop Coop
Player 3 Coop Coop Coop Coop Coop
 Figure 6
Both the players choose to be cooperative and coincidentally they end up on the same page in all the
rounds. This game paints a picture that if both parties are willing to do good, there can be very
interesting results favoring both the parties and ultimately increasing the payoff.

We will analyze another game in which player 38 chooses to go cooperative in all five rounds and other
player adopts a different technique in some of the rounds, table is given below;

Team/Round 5 4 3 2 1
Player 38 Coop Coop Coop Coop Coop
Player 42 Cpt Coop Coop Coop Coop

Figure 7
Player 38 has a disadvantage in round 5 when player 42 decides to compete and payoff for player 38
gets decreased.

Now we will move toward a dynamic version of the game where a player adopts a unpredictable
strategy and will analyze the corresponding results. Table for game 12 is given below;

Team/Round 5 4 3 2 1
Player 36 Cpt Cpt Coop Coop Coop
Player 35 Cpt Cpt Cpt Coop Cpt
Figure 8

In this game, a strategy shift by player 35 results in maximization of the payoff.

While viewing the overall results, we come to know that players learn to play the game involving risk
and opportunity where their payoffs may get maximized or decreased depending on each other’s
strategy. When players keep in mind the rules of the game, they try to get the optimized results by
taking NASH Equilibrium as a reference. Nash Equilibrium is the most stable [2] and realistic state of the
game where risk is minimized by playing sensibly.

From table 1, we come to know that Nash Equilibrium seems to be the competing choice. The outcome
achieved from the analysis of the given data is not a predictable outcome given the average profit
achieved in different rounds.

Conclusion:
Prisoner’s Dilemma is a kind of situation where players are required to be tactically and strategically alert
and attentive to make sure the outcome is favorable for both the players. In majority of business strategies
and public policies [3], decision makers are often confronted with two or more choices and a possible
number of consequences. Policy Makers need to be rational and should keep in mind the Nash
Equilibrium and consider it as a standardized ideal case.
In present case, predicted outcome suggests to go for competition whereas the final results tell you a
different story. The table for profit depicts that when players go for cooperation, the profit is greater as
compared to the other cases. This is a type of drawback of the predictable outcome of the game theory
when optimized strategy suggests you to opt for something conventional but going for unorthodox
approach increases your chances of getting the maximum payoff.
Moreover, the game theory of prisoner’s dilemma prepares the students for future challenges of the
professional world where there will be confronted by unforeseeable circumstances requiring them to think
out of the box and go for a better decision in order to get a favorable result.

References

[1]

Jeol, W. (2013). Strategy An Introduction to game Theory. WW. Norton & Co.

[2] Richard, D. (1976). The Selfish Gene. Oxford Univ. Press.

[3]Robert, A. (1980). More Effective Choice in Prisoner's Dilemma. Journal of Conflict Resolution, 24,
379-403.