Prisoner''s dilemma- non-zero sum games, Managerial Accounting

Prisoner's Dilemma

To understand the prisoner’s dilemma, let’s consider a story as follows:

Two peoples are arrested for a crime. The police lack enough evidence to convict either suspect and consequently need them to give testimony against each other.

The police tell each suspect that if he testifies against the other (or does not cooperate with the other), he will be rewarded for testifying and hence will be released, provided the other suspect does not testify against him. If neither testifies, the prosecutor will be unable to prove the crime and each suspect can only receive minor sentence. If both suspects confess and testify against each other, then both will receive an intermediate prison sentence. Hence the conflict of interest, the tendency to double cross and lose the confidence of the other.

Each suspect must decide under the circumstances, whether or not to confess.

It is possible to translate such a situation in the form of a table and a payoff matrix as follows:

278_table1.jpg



Payoff Table

213_table2.jpg

This is an example of non-zero sum, non-cooperative game.

Posted Date: 12/8/2012 4:11:51 AM | Location : United States







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