The Economics Book

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to research areas such as game

theory, which was seen to be

particularly relevant to the politics

of the Cold War.

In 1950, the game theorists at

RAND devised two examples of

non-cooperative games. The first

was published under the name

“So Long Sucker.” This game was

specifically designed to be as

psychologically cruel as possible.

It forced players into coalitions,

but ultimately to win you had to

double-cross your partner. It is

said that after trials of the game,

husbands and wives often went

home in separate taxis.

The prisoner’s dilemma

Perhaps the most famous example

of a non-cooperative game is the

prisoner’s dilemma. It was created

in 1950 by Melvin Dresher and

Merrill Flood and builds on Nash’s

work. The dilemma involves two

captured criminals who are kept

separate during interrogation

and offered the following choices:

They are told that if they both

testify against each other, they

will each get a medium jail

sentence that will be painful but

bearable. If neither will testify

against the other, then they will

both receive a short sentence that

they will cope with easily. However,

if one agrees to testify and the

other does not, then the man who

testifies will go free, and the man

who stayed silent will receive a

long sentence that will ruin his life.

The dilemma for each prisoner

is this: to betray or not to betray.

If he betrays his partner, he will

go free or end up with a medium

sentence. If he trusts his partner

not to betray him, he could end

up with a short sentence or a

very long time in prison. To avoid

the possibility of the “sucker’s

There was an incredible blooming
of game theory after World War II,
much of it at the think tank RAND
(the name comes from Research
ANd Development). Set up by the
US government in 1946, RAND was
charged with putting science at the
service of national security. They
employed mathematicians,
economists, and other scientists

GAME THEORY

The prisoner’s dilemma is
an example of a non-cooperative
game in which neither party can
communicate with the other. The
“Nash equilibrium” of the game
is for both players to betray.

Betrays

6 months

Free 10 years 3 years

10 years Free

Stays silent

Stays silent

Betrays

Game theory is

rational behavior in

social situations.

John Harsanyi

US economist (1920–2000)