Game Theory

The Prisoner's Dilemma

Game Theory and Interdependent Outcomes Game theory is the study of interdependent decision making, or how individuals make decisions when their optimal choice depends on what others have chosen. Probably the best known application of game theory is the Prisoner’s Dilemma. In this game, there is a tension between the incentives faced by each player and the globally optimal outcome. In the parlance of game theory, Nash equilibrium is not Pareto optimal.
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