worse off than it would have been had they been able to enforce an
output-restricting agreement and thus achieve the cooperative outcome.
This type of game, in which the non-cooperative outcome makes both
players worse off than if they had been able to cooperate, is called a
prisoners’ dilemma. The reason for this curious name is discussed in
Extensions in Theory 11-1.
Extensions in Game Theory
The Prisoners’ Dilemma
The game shown in Figure 11-3 is often known as a prisoners’
dilemma game. This is the story behind the name.
Two men, John and William, are arrested on suspicion of jointly
committing a crime and, in the absence of witnesses, are
interrogated separately. They know that if they both plead
innocence, they will get only a light sentence, and if they both
admit guilt they will both receive a medium sentence. Each is
told, however, that if either protests innocence while the other
admits guilt, the one who claims innocence will get a severe
sentence while the other will be released with no sentence at
all.
Here is the payoff matrix for that game: