Data Collected Scenario 1 Scenario 2

Number

Amoun t

Y/N

Number

Amoun t Offere d 40000 3000 60000 60000 10000 0 3000 0 60000

Amount Returned

A 2 3 4 5 6 7 8 9

4000 4000 6000 4000 4000 4000 3500 4000 3500

N Y Y Y N N N Y N

A 2 3 4 5 6 7 8 9

0 0 0.69 1000 0 0 1 0 44999.9 9 6969 22500 0

10 Q K

5100 4000 4000

Y Y N

10 Q K

60000 30000 0

Scenario: The next day, police officers turned up at your doorstep. BUSTED? They cuffed you and took you into the questioning room. They knew about your crime, but they do not seem to have enough circumstantial evidence! You plead to go to the washroom after hours of grueling questioning. As

the police officer escorted you to the washroom, you saw your buddy-in-crime being escorted back into his questioning room. Back in your questioning room, you feel lonely and scared. The police offer offers you an opportunity to plea bargain should you confess and testify against your buddy-in-crime. He shrugs and says, We just need enough evidence to send you to jail... Assuming the following sentence:

Taken from: Game Theory 101 (YouTube) Task: 1. Explore his options and predict the outcome If Sam decides to betray Matthew, he will have two possible outcomes. Assuming Matthew does not betray Sam, Sams punishment would be mitigated while Matthew has to serve ten years in prison. However, if Matthew decide to betray Sam, both Sam and Matthew are forced to serve 5 years in prison each. Inversely, if Sam decides to not betray Matthew, there will also be 2 possible outcomes. If Matthew does not betray Sam, both of them will only have to serve one year in prison each. However if Matthew decides to do otherwise, his sentence would be mitigated and Sam would have to serve 10 years. If both person rat each other out, Nash equilibrium is achieved. Nash equilibrium: A nash equilibrium is a set of strategies, one for each player, such that no player has incentive to change his or her strategy given what the other players

are doing. The nash equilibrium in this experiment is that both people defect (betray each other) and both get to serve 5 years in prison each. However obviously a more beneficial way would be for both to cooperate (keep silent). This way they would only get to serve 1 year each. But since they cannot trust each other to keep quiet. Matthew would doubt that Sam would keep quiet, sabotaging him to serve 10 years and escaping from sentence completely. Likewise, Sam would doubt that Matthew would keep quiet, in turn sabotaging him to serve 10 years and escaping from sentence completely. Thus they rather rat each other out and get an equal sentence (5 years each). This satisfies the condition of a nash equilibrium, in which both Sam and Matthew would not want to serve 10 years and let the other escape (no incentive to change strategy) and so they would rather betray each other serve 5 years each. 2. Explain and defend your prediction As observed from the data collected, betraying Matthew will either bring Sam a get-out-of-jail-free card or 5 years in prison. Not betraying Matthew will either get him 5 years in prison or 1 year in prison. Thus far, it is deduced that betraying Sam brings less punishment than not doing so. Therefore, it is only rationale that Sam decides to betray Matthew. Similarly for Sam, betraying Matthew would seem to be a better option. But as observed from the table, obviously the better punishment would be for both people to keep silent.

3. (Optional) Real World Application: In which other situation may the Prisoners Dilemma be observed? (i.e. The prisoner's dilemma is a canonical example of a game analyzed in game theory that shows why two individuals might not cooperate, even if it appears that it is in their best interests to do so.) A common example of a Real World Situation involving the Prisoners Dilemma is the stockpiling of nuclear weapons by various countries. Countries must be powerful and well-equipped with nuclear weapons to avoid becoming the victim of a nuclear war. If there is a proliferation of nuclear weapons in country A,

then country B will probably try to keep up so that it will not become a target of country As weapons. However, if country A does not stockpile nuclear weapons, and country B does not have to do so, and both countries will have a sense of security. Ties between these countries will not be strained as well. The problem is that both countries may not be able to trust each other. Global warming: All countries co-operate: save the world One country co-operate, one doesnt: one would have more advantage in economic If all countries do not cooperate, the world will one day meet destruction. Doping: All dope: One dope, one doesnt: All dont dope: Women wearing makeup: All wear makeup: One wear makeup, one doesnt: Appear more beautiful All dont wear makeup: