Flood and Dresher, 1950
Both stay quiet and both do well. Selling out pays better, so both sell and both lose.
Two people, separate rooms. Stay quiet, or sell the other out.
Both quiet: not enough evidence, light sentence. Sell alone: you walk. Both sell: both get the heavy one.
If they stay quiet, selling pays. If they sell, you must sell too. Selling wins in both branches, so both sell, and they land somewhere worse than if both had said nothing.
That is the eerie part: everyone calculates correctly and everyone loses.
One-shot, selling is right. Life is not one-shot.
Around 1980 a tournament pitted strategies against each other over hundreds of rounds. The winner was the shortest, simplest program in the field, called Tit for Tat.
Cooperate first. After that, do whatever the other side did last time. Betrayed, you retaliate once. They come back, so do you.
Four traits: never defect first, always answer a defection, forgive immediately, be easy to read. It never tries to beat anyone and it out-earns everyone.
When there is a next round, cooperation appears. Which also means defection rises wherever there is no next round.
Tourist-trap restaurants, the last two weeks in a job, a deal with someone you will never see again. Shabby treatment concentrates where the future does not.
To build trust, establish that there will be a next time. More reliable than hoping for goodwill.
The group assignment
Everyone doing their part is easiest for everyone, and the free rider profits, so it collapses.
The fix is standard: make it visible who did what. Visibility manufactures a next round.
A price war
Both hold prices and both do well. Cutting steals customers. Both cut, neither profits.
Arms races have the same shape. This trap does not require anyone to be a villain.
Cutting the queue
Everyone queues, everyone moves faster. Cut and you personally gain. Most people queue anyway, because they are seen and they will be back here.
If you take one thing
Tit for Tat is directly usable on people. Never go first, answer once, forgive immediately, stay legible. Strong strategies are usually unglamorous.
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