How did the game get its name?
The game got its name from the following hypothetical situation: imagine two criminals arrested under the suspicion of having committed a crime together. However, the police do not have sufficient proof in order to have them convicted. The two prisoners are isolated from each other, and the police visit each of them and offer a deal: the one who offers evidence against the other one will be freed. If none of them accepts the offer, they are in fact cooperating against the police, and both of them will get only a small punishment because of lack of proof. They both gain. However, if one of them betrays the other one, by confessing to the police, the defector will gain more, since he is freed; the one who remained silent, on the other hand, will receive the full punishment, since he did not help the police, and there is sufficient proof. If both betray, both will be punished, but less severely than if they had refused to talk. The dilemma resides in the fact that each prisoner has a choice between only two options, but cannot make a good decision without knowing what the other one will do.
The two players in the game can choose between two moves, either "cooperate" or "defect". The idea is that each player gains when both cooperate, but if only one of them cooperates, the other one, who defects, will gain more. If both defect, both lose (or gain very little) but not as much as the "cheated" cooperator whose cooperation is not returned. The whole game situation and its different outcomes can be summarized by a table given below, where hypothetical "points" are given as an example of how the differences in result might be quantified.
Table 1: outcomes for actor A (in words, and in hypothetical "points") depending on the combination of A's action and B's action, in the "prisoner's dilemma" game situation. A similar scheme applies to the outcomes for B.
For simplicity we might consider the Prisoner's dilemma as zero-sum insofar as there is no mutual cooperation: either each gets 0 when both defect, or when one of them cooperates, the defector gets + 10, and the cooperator - 10, in total 0. On the other hand, if both cooperate the resulting synergy creates an additional gain that makes the sum positive: each of them gets 5, in total 10.
The gain for mutual cooperation (5) in the prisoner's dilemma is kept smaller than the gain for one-sided defection (10), so that there would always be a "temptation" to defect. This assumption is not generally valid. Why?
The problem with the prisoner's dilemma is that if both decision-makers were purely rational, they would never cooperate. Indeed, rational decision-making means that you make the decision that is best for you whatever the other actor chooses. Suppose the other one would defect, then it is rational to defect yourself: you won't gain anything, but if you do not defect you will be stuck with a -10 loss. Suppose the other one would cooperate, then you will gain anyway, but you will gain more if you do not cooperate, so here too the rational choice is to defect. The problem is that if both actors are rational, both will decide to defect, and none of them will gain anything. However, if both would "irrationally" decide to cooperate, both would gain 5 points and this is a fairly good decision.
This is realistic if we take into account the fact that the synergy usually only gets its full power after a long-term process of mutual cooperation. The prisoner's dilemma is meant to study short-term decision-making where the actors do not have any specific expectations about future interactions or collaborations (as is the case in the original situation of the jailed criminals).
Prof. Ashay Dharwadker