Game Theory 101: The Complete Textbook on Amazon: http://www.amazon.com/gp/pr...
Two prisoners are locked into separate interrogation rooms. The cops know they were trespassing and believe they were planning on robbing a store, but they lack sufficient evidence to charge them with the latter crime. Thus, they offer the prisoners the following deal:
If no one confesses, both will only be charged with trespassing and receive a sentence of one month. If one confesses while the other keeps quiet, the confessor will get to walk away free, while the one who kept quiet will be charged to the fullest extent of the law--twelve months in jail. Finally, if both confess, each criminal's testimony is less useful, and both will be locked up for eight months.
If each prisoner only want to minimize the amount of time he spends in jail, what should they do?
This lesson introduces the concept of strict dominance, which is a very useful tool for a game theorist.