Let’s assume you are starting a new project with your another colleague with whom you have not worked before or have worked before but still unsure about the “trustworthiness” factor. In other words, room for uncertainty:
- Will he play nice and cooperate?
- Will he defect and maximize his own satisfaction at your cost?
Given the uncertainty, what should be your strategy:
- Should you defect, since in the short-run you might have potentially larger payoff?
- Should you cooperate for smaller pay-off in the short-run since you might percieve this as ethically better choice?
Furthermore, let’s assume, you cooperate the first time around and the other person defects. In that case:
- Will you go into massive retaliation and swear never to work with that person again?
- Will you let go this time and in the next engagement, you will defect, so you can teach him a lesson that if he can defect, you can defect to?
I will first state the “right” answers and then develop the reasoning behind it in the subsequent posts. According to Game Theory, in Prisoner Dilemma (PD) type scenarios (beware of pseudo-PD’s), the right approach is the following:
- Always cooperate
- If the other party defects , follow the “tit-for-tat” strategy. You defect the next time, and this will lead to cooperation from the other party in subsequent engagement, leading to preferable cooperate-cooperate scenario for all future engagements.