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The Ultimate Game Theory Strategy

Jared Bamford

‘The Prisoners’ Dilemma’ is a popular game theory example involving a two-person game of strategic interaction. One version is as follows.


Two prisoners are accused of a crime. If one confesses and the other does not, the one who confesses will be released immediately and the other will spend 20 years in prison. If neither confesses, each will be held for only a few months. If both confess, they each spend 15 years in prison. This creates a paradox in decision analysis in which two individuals acting in their own self-interest do not produce the optimal outcome.


Recently I watched a British game show apply a version of the prisoners’ dilemma with two contestants playing for $13,000 prize money. Both players (which we’ll call player A & player B), had the option to either split or steal. If both decide to split, they share the prize money. If one player splits but the other steals then all prize money is won by the player who stole. If both choose steal, then neither player wins any money.


The players were given one minute to discuss and attempt to convince each other of their intentions. I was astounded to watch Player A apply a genius psychological trick to control Player B’s behaviour. He calmly but firmly stated “I want you to trust me, 100% I’m going to steal from you, and then I’ll split the money with you after the show”. Player B was completely shocked and confused as naturally expected Player A to attempt a persuasive pitch to coerce him to split. After an unsuccessful attempt to convince Player A to reconsider, and with time running out he realised he now had no chance of walking home with the entire $13,000 leaving him to decide which of two outcomes he preferred:


  1. Steal – to at least deprive Player A from taking any winnings or
  2. Split – seemingly the only chance of taking home any winnings by hoping Player A will honour his word and share the money after the show


Player B said, “Stuff it, OK fine I’m going to trust that you’ll honour your word” and both players locked in their final decisions. The audience erupted into applause when it was revealed that in fact not only did Player B choose split but so did Player A and the realisation that Player A had employed a genius psychological trick that reset player B’s decision-making parameters.


During negotiations psychological tactics are often prevalent. One such example I often see is where negotiators introduce an “Irritant”, or variable that isn’t welcomed by their counter party. This alters their decision-making parameters, and they recognise they now need to negotiate that variable back off the table and by doing so they may be forced to compromise elsewhere.


It’s always wise to consider how psychology could assist you in your negotiation strategy, and also have the discipline to adjourn frequently and consider amongst other things if your counter-party may be applying psychological tactics of their own.


Happy negotiating.

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