To gain a competitive edge over ‘B’, ‘A’ undertakes extensive marketing and advertising, and also lowers the price of its product. Real-life Examples Example #1 The Modern Business Scenarioįor example, there are two rivals in the market ‘A’ and ‘B’. On the other hand, if you think of the group interest, and the other members of the group think of their self-interests, you’ll end up bearing all the loss. Sometimes, choosing self-interest might not be of any value to you, if the others too think of their own profit. We all come across such a situation, where we have to make a choice between self-interest and that of the group. This narrative represents a dilemma faced by all of us in the real world. If they have mutual trust, it will be easy for them to have a win-win situation by staying mum. They’re faced with this dilemma, since there is a risk of the other partner testifying against if the other one remains mum. However, neither of them know what the other will say, and a lack of trust and confidence in the other accomplice may compel one of them to testify rather than remain silent. Thus, the best option for both suspects is to remain silent and not testify against the other. However, if both remain silent, due to a lack of evidence, the police will have to sentence both to a much lesser period. On the other hand, if both confess and accuse the other to be a culprit, they’ll share the sentence of imprisonment, that will be lesser than the full term. If one confesses and the other remains silent, he (who remained silent) will have to serve the full tenure of punishment.

They have two options―to confess or remain silent. Both are rational, and value their personal freedom more than the other’s. To convict them, the police need testimony from at least one of them. They are questioned by the police in separate rooms. Two men are arrested by the police on suspicion of committing the same crime. Let’s take a brief look at the traditional example that propounds this concept. He developed the game theory after being inspired by the ‘bluffing technique’ in poker. ‘The prisoner’s dilemma’ is a byproduct of the ‘game theory’ developed by noted scientist John von Neumann.

Game theory real life