The Gambler’s Dilemma
The Gambler’s Dilemma is a classic example of a problem in game theory. It involves two players, each with the option to choose between two strategies: “bet” or “stay.” The players simultaneously select one of the two strategies, and the payouts are as follows:
- If both players choose “bet,” each player receives a payout of $0.
- If one player chooses “bet” and the other chooses “stay,” the player who decided “bet” receives a payout of $2, and the player who chose “stay” gets a payout of $0.
- If both players choose “stay,” each player receives a payout of $1.
The dilemma for the players is that if they both choose “stay,” they will both receive a payout of $1, but if one player chooses “bet” and the other chooses “stay,” the player who decided “bet” will receive a higher payout. This creates a tension between the desire to cooperate and the temptation to defect to maximize one’s payout.