Prisoner’s Dilemma:
Prisoner’s Dilemma A situation with two suspects separated from each other and interrogated. There are four potential outcomes: Both suspects remain silent and receive a lessor sentence. One confesses and the other remains silent. This results in the suspect remaining silent being sentenced with the maximum and the confessor receiving minimum sentencing. Same as outcome two but prisoners switching roles. Both prisoners confess, this results in a shared sentence higher than outcome one but less than maximum.
Relationship to Business:
Relationship to Business The prisoner’s dilemma helps us understand what governs the balance between competition and cooperation in business. Example: Two firms, Coca-cola and Pepsi, selling similar products, each must decide on a pricing strategy. They best exploit their joint market power when both charge a high price. Each makes a profit of 10 million a month. If one sets a low price it wins customers from rival and suppose its profit rises to 12 million a month and that of the rival falls to 7 million. If both set low prices the profit of each is 9 million.
Peer Evaluation:
Peer Evaluation Suppose two groups did poorly on a project and the teacher asks for peer evaluation. The prisoners dilemma relates to the student’s options when it comes to their responses. They could both give great reviews to each other which would be equivalent to outcome one (remaining silent). One group gives a great review while the other group gives an honest review. (Honest group rewarded with higher grade, other group receives worst possible) Both groups give an honest review and both get the grades they deserve.
Team Dynamics:
Team Dynamics Project in school example: There are four members in a team for a classroom assignment. Each student has their part of the assignment to complete and turn in however, there is the biggest party of the year at the same night. All members do their part and the assignment gets completed. Nobody goes to the party. If 1 to 3 members do their part then the assignment is partially completed. Those that did not complete their work went to the party. If no members do their part than the assignment is not completed at all. Everyone went to the party.
References:
References Nalebuff , A. D. (2010). Library of Economics and Liberty . Retrieved from http://www.econlib.org/library/Enc/PrisonersDilemma.html The Prisoner's Dilemma in Business . (2005). Retrieved from http://www.spectacle.org/995/bus.html Toskala , T. (2007). The Prisoner's Dilemma in Business Competition . Retrieved from http://ezinearticles.com/?The-Prisoners-Dilemma-in-Business-Competition&id=236346 Wikipedia. (2011, January). Wikipedia . Retrieved from http://en.wikipedia.org/wiki/Prisoner's_dilemma: http://en.wikipedia.org/wiki/Prisoner's_dilemma (2011). In Encyclopædia Britannica . Retrieved from http://www.britannica.com
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