However, since both are acting in their own personal best interests, it does not result in a social optimum. The best outcome for both of them, however, is to not confess in order to spend less time in jail: one year in this case. In this situation, the Nash Equilibrium is for both prisoners to confess, and spend five years, or however many in the context of the problem, in prison. Why utilize a strategy that has a worse payoff for ourselves than another strategy where we gain more? The author illustrates the famous example of the prisoner’s dilemma. Thus, every person is looking out for their own best interests and self benefit, something that we all collectively do on a daily basis. The author describes how Nash Equilibrium is when each individual in the game “best-responds” to the other individual’s strategies. This article describes game theory and some famous applications in the real world.
