Competition and Cooperation

Anyone who imagines they can work alone winds up surrounded by nothing but rivals, without companions. The fact is, no one ascends alone, Lance Armstrong.

Does cooperation make any sense or is it just a silly utopian dream? Maybe, we should always seek our own selfish interests, completely disregarding anyone else’s feelings or how our actions might affect them.

There was an experiment that illustrates this problem perfectly, the Prisoner’s Dilemma (Merrill Flood & Melvin Dresher, 1950). There are two thieves who have committed a crime, but not enough incriminating evidence.

The police, completely hopeless, use a technique in which they visit each one separately and both prisoners are offered the following deal:

• If both of them confess and then betray the other, each of them will serve six years in prison.
• If both deny it or remain silent, they will have no choice but to file a misdemeanor charge against them and put them behind bars for only six months as police will lack the necessary evidence to incriminate them.
• However, and here is the key, if one confesses and his accomplice denies the crime, the prisoner is set free in exchange for his evidence used to convict the other mate of the crime bringing a 10-year sentence.

Of course, each prisoner is in solitary confinement, that is, he or she does not have any means of speaking to or exchanging messages with the other. If you were one of the prisoners, unable to communicate with your fellow accomplice, would you confess?

It is in the interest of each one of them ― in order to minimize their own sentences ― to confess no matter what the other does, but it is in their collective interest to hold out. What seems rational and self-interested from the point of view of one, turns out to be detrimental and then both parties end up far worse off (6 years) than if they had trusted each other, kept silence and gained a joint profit (6 months).

The ideal strategy is to cooperate. They should each trust their accomplice and deny the crime. They will only both serve a six-month sentence, a remarkably lower period than if they compete and mistrust each other.

When everyone seeks the group’s interest, then we all come out better off than if we only look selfishly to our own self-interest!

Suppose we iterate this game and we remember our previous results. What is the best strategy? In the long term, “tit for tat” ― equivalent retaliation ― has shown to be the most successful. It starts by cooperating with the other party ― kind of a handshake when you meet someone. Then, it replicates the opponent’s previous action. If the opponent was cooperative previously, the player is cooperative. If not, the player responds by punishing him. If the opponent player changes his attitude, this style of play (clear and simple, easily understood by everyone) responds appropriately, they both return to collaborate and obtain the optimal solution.

In other words, a forgiving strategy is the best choice when the other player understands that cooperation is useful for both.

Let’s recall ordinary everyday examples where we can find similar situations:

• Many countries are involved in an arms race. There are two options. The first one is to increase their military spending “to safeguard their interests.” They are suspicious of their enemy’s intentions and manifest their intention to “defend” themselves, thus increasing the chances of war. On the contrary, they can collaborate and agree on a peace plan to reduce their arsenals, solve their differences through diplomacy and negotiations and therefore, reduce the mutual threat and divert the military spending to welfare.
• Two or more companies can compete on price and quality of service or they can work together to fix prices, control markets, and eliminate competition, just like OPEC did in the 1970s when they cut production and increased prices.
• When a couple get divorced, they have two options. One possibility is to reach a mutual agreement through rational dialogue and compromise. The second option is when one of the party or both try to get their maximum benefits, they may use unscrupulous lawyers, false witnesses, exaggerate the facts, etc.

They may achieve their objectives (child custody, getting as much money and assets as possible, limiting the parenting time of the other, etc), but they will all end up losing in a long, dirty, and destructive war with no winner, just sadness and sorrow among everyone involved. It will turn against them because of the damage done to their offsprings, the impossibility of collaboration in the future, etc.