Topic 16: Game Theory and Chicken

This week we experimented with game theory using “The Prisoner’s Dilemma.” We found out that the Nash Equilibrium occurs when each player acts in his/her own best interest no matter what the other does. Even though there are communication between the two groups, each group still didn’t trust each other to not to confess, because they believed that other would betray them and made them get more years in jail. Most of the time, people make rational decisions, thinking about the benefits and the cost of different decision. However, sometimes people had a sudden whim to do something without thinking much. Therefore they might end up having in a worse situation. In our experiment, both group got the same amount of years for jail but the years weren’t the least. If in all rounds, each group were to stay quiet, we wouldn’t have that many years in jail. Therefore in this case, bad outcome is always inevitable. People try to avoid bad outcome, but sometimes it just happens due to the dishonesty of other group or wrong decision. For example, in communication, you might tell the other group that two of you would stay quiet to get the better outcome. However, during the decision making, each group might not trust what other had said earlier. This caused them to confess. If the other group doesn’t confess, that group will get more years in jail. Trust is what makes a better outcome.