An Empirical Approach to the Prisoners' Dilemma Game
Date of Original Version
Abstract or Description
Adam Smith's invisible hand had the important property that, if each individual pursued his profit in optimal fashion, the total profit of the community would be maximized. Game theory has proposed a simple situation reversing this conclusion: two prisoners, arrested for a crime, are questioned separately. Each is informed it cannot be proved they committed the crime but that if (1) A does not confess to the crime and (1') B does not confess, both will receive six months in jail on a minor charge; if (1) A does not confess and (2') B does confess, A will receive ten years in prison while B goes free. On the other hand, if (2) A confesses and (1') B does not confess, A will go free while B goes to prison for ten years; while if (2) A confesses and (2') B confesses also, both will go to jail for eight years.
The Quarterly Journal of Economics, 76, 3, 424-436.