Communication and Bargains

How can we overcome a prisoner’s dilemma? You have probably noticed that the prisoner’s dilemma assumed that the two prisoner’s were isolated from each other. This was not an accident. If the two prisoner’s can communicate with each other, then they might reach an agreement. Alice might say to Ben, “I won’t confess if you won’t,” and Ben might say, “I agree.” Of course, this might not solve the prisoner’s dilemma. Why not? Suppose they do agree not to confess, but each is then taken to a separate room and given a confession to sign. Ben might reason as follows, “If I keep the bargain, and Alice does not, then she will get off while I get a heavy sentence.” So Ben may be tempted to defect from their agreement. And Alice may reason in exactly the same way. On the other hand, it may be that Ben and Alice have a reason to trust one another. For example, they may have had prior dealings in which each proved trustworthy to the other. Of course, trust can be established in another way. If each party can make a credible threat of retaliation against the other, then those threats may change the payoff structure in such a way as to make the cooperative strategy dominant. One situation in which the threat of retaliation is built into the model is the iterative (repeated) prisoner’s dilemma.

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