Why Not Rational?
2
Prisoner A Don’t Confess Confess Don’t Confess Confess Prisoner B The Prisoner’s Dilemma Both jailed 15 years Prisoner A: 20 years Prisoner B: Free! Prisoner A: Free! Prisoner B: 20 Years Both held for 6 months
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Game Theory Example in Chemicals
Transcript of Why Not Rational?
Prisoner ADon’t Confess Confess
Do
n’t
Co
nfe
ssC
on
fess
Pri
son
er B
The Prisoner’s Dilemma
Both jailed 15 yearsBoth jailed 15 yearsPrisoner A:
20 years
Prisoner B: Free!
Prisoner A: 20 years
Prisoner B: Free!
Prisoner A: Free!
Prisoner B: 20 Years
Prisoner A: Free!
Prisoner B: 20 Years
Both held for 6 monthsBoth held for 6 months
The Chemical Company’s DilemmaCompany A
Maintain Capacity Double Capacity
Mai
nta
in
Cap
acit
yD
ou
ble
Cap
acit
y
Co
mp
any
B
Company A: Lose lots of $
Company B: Lose lots of $
Company A: Lose lots of $
Company B: Lose lots of $
Company A: Make less $, lose market share
Company B: Make lots of $
Company A: Make less $, lose market share
Company B: Make lots of $
Company A: Make lots of $
Company B: Make less $, lose market share
Company A: Make lots of $
Company B: Make less $, lose market share
Company A: Make decent $
Company B: Make decent $
Company A: Make decent $
Company B: Make decent $
