In a one-shot Prisoner's Dilemma where both players know they will never interact again, what should a purely self-interested rational player do, and why is this outcome paradoxical?
ACooperate — because mutual cooperation produces the best collective outcome, which rational players prefer
BDefect — because defection dominates cooperation regardless of what the other player does, yet both defecting is worse than mutual cooperation
CCooperate — because reputation effects make defection costly even in a one-shot game
DMix strategies randomly — to prevent the other player from exploiting a predictable choice
In a one-shot Prisoner's Dilemma, defection is the dominant strategy: no matter what the other player does, defecting produces a better personal outcome than cooperating. This is individually rational. Yet when both players follow this logic, they both defect and receive a worse outcome than if both had cooperated. The paradox is that individual rationality produces collective irrationality. Reputation (option C) only matters when there are future interactions — in a single-shot game, it cannot affect outcomes.
Question 2 Multiple Choice
Researchers run a public goods experiment where strangers make one-time contributions to a shared pool. Before contributing, participants may discuss the game — but the discussion is non-binding, with no enforcement mechanism. What does research consistently find?
ACommunication has no effect, since rational actors ignore promises they know cannot be enforced
BCommunication decreases cooperation, because players use it to coordinate on free-riding strategies
CCommunication substantially increases cooperation rates, even without any enforcement mechanism
DCommunication only helps when group members have established prior relationships
This is one of the most robust findings in social dilemma research: non-binding cheap talk increases cooperation rates dramatically — typically by 20–40 percentage points in controlled experiments. Even when everyone knows promises can't be enforced, discussion builds shared group identity and social commitment that influences behavior. Option A is what classical game theory predicts for purely self-interested rational actors; it is consistently falsified by empirical data. People are social actors whose cooperation is sensitive to norms and perceived intentions, not just payoff calculations.
Question 3 True / False
The Tragedy of the Commons proves that shared resources will inevitably be destroyed whenever individuals act self-interestedly.
TTrue
FFalse
Answer: False
Hardin's Tragedy of the Commons describes one possible outcome — not an inevitable one. Elinor Ostrom (awarded the Nobel Prize in Economics, 2009) documented many cases where communities sustainably managed shared resources — fisheries, pastures, irrigation systems — through norms, monitoring, and graduated sanctions, without privatization or state control. The conditions that prevent tragedy include communication, group identity, mutual accountability, and stable membership. Institutional design can redirect individual rationality without eliminating it.
Question 4 True / False
In the Prisoner's Dilemma, mutual defection is a Nash equilibrium — meaning neither player can improve their outcome by unilaterally switching to cooperation while the other continues to defect.
TTrue
FFalse
Answer: True
A Nash equilibrium is a strategy profile where no player benefits from deviating unilaterally. If both players are defecting and one switches to cooperation while the other keeps defecting, the switcher receives the worst possible payoff (the sucker's payoff). So there is no incentive to deviate. This is exactly why the dilemma is dilemmatic: the Nash equilibrium (both defect) is stable but produces an inferior outcome for both players. Mutual cooperation, though collectively better, is not a Nash equilibrium — each player is tempted to defect from it.
Question 5 Short Answer
Why does repeated interaction promote cooperation in social dilemmas, and what specific condition can cause cooperation to unravel even in a repeated game?
Think about your answer, then reveal below.
Model answer: Repeated interaction gives cooperation instrumental value: future rounds of mutual cooperation are worth preserving, and defecting today forfeits those future benefits. The shadow of the future makes cooperation rational even for self-interested agents. Cooperation unravels when there is a known, certain endpoint: in a finitely repeated game, both players defect in the last round (no future to protect), which by backward induction causes defection in every prior round.
The backward induction result — that rational players defect in all rounds of a finitely repeated game — explains why indefinitely repeated games sustain cooperation better than finitely repeated ones. When neither player knows when the game ends, the expected value of future cooperation can always outweigh the immediate gain from defecting. This is why commitment devices, long-term relationships, and uncertainty about the endpoint are strategically valuable: they preserve the conditions under which individual rationality and collective welfare align.