Generalized Game Theory - Example: Prisoner's Dilemma

Example: Prisoner's Dilemma

In the example of the two-player prisoner's dilemma, for instance, proponents of generalized game theory are critical of the rational Nash equilibrium wherein both actors defect because rational actors, it is argued, would actually be predisposed to work out coordinating mechanisms in order to achieve optimum outcomes. Although these mechanisms are not usually included in the rules of the game, generalized game theorists argue that they do exist in real life situations.

This is because there exists in most interaction situations a social relationship between the players characterized by rules and rule complexes. This relationship may be one of, for instance, solidarity (which results in the Pareto optimal outcome), adversary (which results in the Nash equilibrium), or even hierarchy (by which one actor sacrifices their own benefits for the other's good). Some values, such as pure rivalry, are seen as nonstable because both actors would seek asymmetric gain, and thus would need to either transform the game or seek another value to attempt to satisfy.

If no communication mechanism is given (as is usual in the prisoner's dilemma), the operative social relationship between the actors is based on the actors own beliefs about the other (perhaps as another member of the human race, solidarity will be felt, or perhaps as an adversary). This illustrates the principle of game transformation, which is a key element of the theory.