*

*
* Strategic decisions making by intelligent rational thinkers * Helps decision making under uncertainty * Taking your best decision considering the rivals best move
Not Applicable to * Games of pure chance, e.g. lotteries, slot machines. (Strategies don't matter). * Games without strategic interaction between players

*
* Two Prisoners, Ramesh & Suresh * Each prisoner has two possible actions. * Prisoners choose actions simultaneously without knowing the
action chosen by the other. * Consequences quantified in prison years.

* Ramesh: Don't Confess, Confess * Suresh: Don't Confess, Confess

* Fewer years=greater satisfaction=>higher payoff.

* If neither confesses, each gets 1 year * If both confess, each gets 5 years * If 1 confesses, he goes free and other gets 15 years

*
We have your friend Ramesh and he is starting to talk

Will Suresh confess?

*
Ramesh Confess Dont Confess

Suresh

Confess

( -5,

-5)

( 0, -15)

Dont Confess

( -15, 0)

( -1, -1)

Nash to help out Ramesh

*
Nash Equilibrium

Neither player has an incentive to change strategy, given the other players choice

If Suresh commits to Dont Confess, Ramesh has an incentive to confess

If Ramesh commits to Dont Confess, Suresh has an incentive to confess

*
Conclusion: The Suresh will confess

And Ramesh?

*
Ramesh Confess Dont Confess

Suresh

Confess

( -5,

-5)

( 0, -15)

Dont Confess

( -15, 0)

( -1, -1)

*
Conclusion: Ramesh confesses also Best Decisions of both strategic players Dont even get the 2nd best Both get 5 years, even though if they cooperated, they could get off with one year each

For both, confession is a dominant strategy: a strategy that yields a better outcome regardless of the opponents choice

*
What would the Ramesh and Suresh decide if they could negotiate? They could both become better off if they reached the cooperative solution.
which is why police interrogate suspects in separate rooms.

Tit for Tat Tit for Two Tat Suspicious Tit for Tat Free Rider Always Cooperate

Axelrods Tournament

Tit for Tat Tit for Two Tat Suspicious Tit for Tat Free Rider Always Cooperate

Axelrods Tournament

* The action chosen is based on the opponents last

move.

* On the first turn, the previous move cannot be known,

so always cooperate on the first move. your next move.

* Thereafter, always choose the opponents last move as

* Nice; it cooperates on the first move. * Regulatory; it punishes defection with defection. * Forgiving; it continues cooperation after cooperation
by the opponent.

* Clear; it is easy for opponent to guess the next move,

so mutual benefit is easier to attain.

* Same as Tit for Tat, but requires two consecutive

defections for a defection to be returned.
as the next move.

* Cooperate on the first two moves. * If the opponent defects twice in a row, choose defection

* Key Points of Tit for Two Tat

* When defection is the opponents first move, this strategy
outperforms Tit for Tat * Cooperating after the first defection causes the opponent to cooperate also. Thus, in the long run, both players benefit more points.

* Always defect on the first move. * Thereafter, replicate opponents last move. * Key Points of Suspicious Tit for Tat
* If the opponents first move is defection, this
* The first move is inconsequential compared to
getting stuck in an infinite defection loop.

strategy outperforms Tit for Tat * However, it is generally worse than Tit for Tat.

* Always choose to defect no matter what the

opponents last turn was.

* This is a dominant strategy against an

opponent that has a tendency to cooperate.

* Always choose to cooperate no matter what

the opponents last turn was.

* This strategy can be terribly abused by the

Free Rider Strategy.

* Or even a strategy that tends towards defection.

*Took place in the early 1980s *Professional game theorists were invited by Axelrod
to submit their own programs for playing the iterative Prisoners Dilemma. *Each strategy played every other, a clone of itself, and a strategy that cooperated and defected at random hundreds of times

*Tit for Tat won the first Tournament. *Moreover, Tit for Tat won a second tournament where
all 63 entries had been given the results of the first tournament.