Cooperation wins, even if you lose every time

The most famous problem in game theory is called “ The Prisoner’s Dilemma “, and you’ve likely seen it play out in game shows over the years. In game shows, it often comes down to the final two players with a secret vote to split the pot or try to take more for themselves, and the logic behind making the “right” choice can be very challenging.

The full explanation of how this dilemma works is fairly complicated ( Investopedia has a great post about it), but it goes something like this:

• You and someone else are in separate rooms, and each offered a deal.
• If you both cooperate, you each get $3.
• If you both defect, you each get $1.
• If you cooperate but your opponent defects, they get $5 and you get $0.

Clearly the best overall strategy is to both cooperate, but the best individual strategy is to always defect. If you defect you always come out ahead, because if:

• Your opponent also defects, you get $1 instead of $0.
• Your opponent cooperates, you get $5 instead of $3.

It’s always better to defect, right?

The long game

For a single game, yes, you’re best off defecting. However, in the long run you’re best off…