The Prisoner’s Dilemma in Business

When to cooperate and when not to, on the work floor.

Patrick Heller
4 min readDec 12, 2022

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Perhaps you’ve heard of the term “Prisoner’s Dilemma”, but maybe not in relation to a business environment. Find out about the prisoner’s dilemma, the iterated prisoner’s dilemma, and how to link them to stakeholder management.

In social psychology, a small hypothetical story is used to point out a situation that occurs quite often in our daily lives, not in the least at work. The story goes as follows. Two bank robbers manage to steal a hefty sum of money from a bank and are able to hide the loot before the cops capture them both.

The police don’t have that much to go on, since they have the bank robbers, but not the money. The robbers are held for questioning in separate cells. Then the police questioner plays a devious game on them.

Both are proposed that if they tell on their mate, and their mate does not, they go free immediately and their co-robber will be imprisoned for 20 years. If both tell on each other, their prison sentence will be short but substantial, 5 years. And if neither one turns their back on the other, the evidence is mostly circumstantial and they will both have to serve 1 year in prison.

The prisoner’s dilemma is then, will I cooperate with my friend, or will I defect and try and save my hide — with the risk attached that my friend does the same? What if I cooperate, and my friend defects? That would be really terrible! What are the odds? There is no real solution to this dilemma.

At work, you might encounter the prisoner’s dilemma as a manager, for instance, when there is an organizational overhaul taking place. When the budgets are to be (re-)distributed, do you go for what’s good for the company, or do you go for what’s good for your department? Do you cooperate with other managers, or do you defect and hope they won’t do the same?

Tit-for-tat

A one-time prisoner’s dilemma is a truly nerve-wracking predicament. Things change, however, if you face the same prisoner’s dilemma over and over again. Think, for instance, of the stakeholders of a product that you make.

In a modern environment, you probably work in iterations — like Scrum Sprints of…

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