In the mid-1920's, the Nebraska State Police achieved what may still be their finest moment. After a 400-mile car chase over dirt roads and corn fields, they finally caught up with the notorious bank robbers Bonnie and Clyde. The two criminals were brought back to the police station in Omaha for further interrogation.
Bonnie and Clyde were questioned in separate rooms, and each was offered the same deal by the police. The deal went as follows (since both are the same, we need only describe the version presented to Bonnie):
``Bonnie, here's the offer that we are making to both you and Clyde. If you both hold out on us, and don't confess to bank robbery, then we admit that we don't have enough proof to convict you. However, we will be be able to jail you both for one year, for reckless driving and endangerment of corn. If you turn state's witness and help us convict Clyde (assuming he doesn't confess), then you will go free, and Clyde will get twenty years in prison. On the other hand, if you don't confess and Clyde does, then he will go free and you will get twenty years.''
``What happens if both Clyde and I confess?'' asked Bonnie.
``Then you both get five years,'' said the interrogator.
Bonnie, who had been a math major at Cal Tech before turning to crime, reasoned this way: ``Suppose Clyde intends to confess. Then if I don't confess, I'll get twenty years, but if I do confess, I'll only get five years. On the other hand, suppose Clyde intends to hold out on the cops. Then if I don't confess, I'll go to jail for a year, but if I do confess, I'll go free. So no matter what Clyde intends to do, I am better off confessing than holding out. So I'd better confess.''
Naturally, Clyde employed the very same reasoning. Both criminals confessed, and both went to jail for five years. The police, of course, were triumphant, since the criminals would have been free in a year had both remained silent.
The Prisoner's Dilemma has been a major part of Game Theory since the Second World War. Albert Tucker formalised the game in 1992, and it has been used as the key predictive theory for morality, ethics and consumer behaviour by modern economists. You can read a lot more elaborately at the attached link, http://plato.stanford.edu/entries/prisoner-dilemma/.
For all in awe of Ledger's Joker, does it sound familiar?