Prisoners-Dilemma

Imagine you and a partner are arrested for a crime. The police separate you into different rooms and offer each of you the same deal. You can’t communicate. You don’t know what your partner will do. And the choice you make will determine whether you go free or spend years in prison. Welcome to the most famous problem in game theory: the Prisoner’s Dilemma. It reveals a disturbing truth about rational decision-making that explains everything from climate change to price wars to why your office kitchen is always dirty. ...

If you want to master game theory, you need to master payoff matrices. They’re the single most important tool for analyzing two-player games, and once you understand them, you’ll see strategic situations everywhere. A payoff matrix is simply a table that shows every possible outcome of a game and what each player gets in each scenario. But this simple visualization unlocks powerful insights about human behavior, business strategy, and why rational people sometimes make seemingly irrational choices. ...

Here’s one of the most unsettling discoveries in mathematics: perfectly rational players, each acting in their own self-interest, can all end up worse off than if they had acted irrationally. This isn’t a flaw in game theory—it’s a feature of reality that game theory reveals. This paradox explains traffic jams, arms races, overfishing, climate change negotiations, and why businesses sometimes engage in destructive price wars. Understanding it will change how you see human cooperation (and its failures). ...