Game Theory: Prisoner's Dilemma
Two parties each do better by defecting whatever the other does, and both end up worse than if they had cooperated; the way out is repetition, reputation and enforceable commitment, not appeals to goodwill.
An everyday example
Two suppliers in a price war that leaves both unprofitable, each unable to raise prices first.
What it can cost you
Cooperating naively in a one-shot game; defecting reflexively in a repeated one and destroying a relationship worth more than the round.
Warning signs
- We are both losing and neither can stop first.
- I am treating a long relationship as a single round.
One thing to do
Ask whether the game repeats; if it does, cooperate first, retaliate proportionately, forgive quickly, and be predictable. If it does not, protect yourself.
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