Failures of Capitalism: The Prisoners Dilemma

How a simple thought experiment demonstrates a deep problem with free markets.

How many years of prison each prisoner will get, depending on whether they snitch (betray) or stay silent and loyal to each other. Bottom right is the optimal choice.

Real World Examples of Prisoners Dilemma

Advertisement

Cocoa Cola and Pepsi ads are a perfect example of prisoners dilemma. Both brands are already well known, so it is not like they need ads to make consumers aware of their brand. However the prisoners dilemma dictate that they must both engage in an ad’s arms race or see the competition gain marketshare.

Poverty and Pollution

Factories have no strong incentive to clean up (apart from regulation and reputation), since they are marginally affected by pollution. Pollution affects everybody, but nobody wants to be the sucker taking responsibility while the rest freeloads on fresh air and water.

Employers and Employees

Conclusion

Geek dad, living in Oslo, Norway with passion for UX, Julia programming, science, teaching, reading and writing.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store