Game Theory

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Issue:

Business

 

Written by:

Robert M

 

Date added:

March 7, 2017

 

Level:

University

 

Grade:

A

 

No of pages / words:

6 / 1602

 

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4801 times

 

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If neither confesses, they are convicted of a minor crime and are sentenced to 2 months. If both confess, they spend 12 months in jail. However, if one confesses and the other does not, the confessor is released immediately but the other is sentenced to 18 months in jail ? 12 for the crime and 6 for obstructing justice...
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For example, to John, if Peter denies, John will be free immediately, otherwise his time in jail will be reduced from 18 months to 12 months. So it is better for John to confess no matter what Peter does. We call confessing dominant strategy which gives you a better payoff irrespective of what your opponent does...
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