Tit For Tat – The Way to Play
Source: https://www.investopedia.com/terms/t/tit-for-tat.asp
Suppose you were playing a game that pays you and your opponent 2 dollars every time both of you cooperate. However, if you cooperate and your opponent decides to betray, you receive nothing and your opponent receives 3 dollars; if your opponent cooperates and you decide to betray, you receive 3 dollars and your opponent receives nothing. If you both betray, you both receive nothing. What’s the best strategy to employ here? The article suggests you utilize a strategy termed tit for tat, meaning “you do what they just did to you.” Expecting your opponent to cooperate, you would cooperate for the first round. However, if your opponent decided to betray, you would betray next round to reciprocate and as an act of defense. In Axelrod’s tournaments, the “tit for tat” strategy had the most successful outcomes against every other strategy. No selfish strategy was able to crack its foolproof stratagem. What did this strategy have that allowed it to defeat every other strategy? Chris Bateman remarks that the most successful strategy requires the ability to “be nice, be retaliating, be forgiving, and be non-envious.” In the context of this game, being nice requires you to never be the first to defect. To be retaliating requires you to be willing to defect if your opponent defects. To be forgiving requires you to restore trust with your opponent after a defect has occurred. To be non-envious requires you to remain steadfast to cooperating unless being defected at. Thus, the article concludes, “someone who is basically selfish can still best pursue their self-interest simply by deciding to be nice.”
The article presents a variation of the Prisoner’s Dilemma; the Nash Equilibrium would suit neither of its participants. Though both of the participants have a dominant strategy to betray, it is best to cooperate and accumulate the best possible payoff from acting selflessly. Tit for tat highlights these notions and it evidently shows why it is the best strategy to play such a game. This article is related to our class in the way of Game Theory, where we are given a payoff matrix to decide what set of actions are best for a participant to take. We’ve also discussed about Prisoner’s Dilemma, where we’ve seen that dominant strategies may not be the best course of action to take. We can note how these notions are to be applied to real-life scenarios. Oligopolies are great examples that emphasize the importance of Game Theory as they show how each participant can affect another participant’s actions.