Thoughts of prisoner 1: If prisoner 2 confesses, -8 is better than -10, so prisoner 1 should confess. If prisoner 2 lies, 0 is better than -1, so prisoner 1 should also confess. So the Nash Equilibrium is at confession, while lie together is the ultimate, optimized strategy.
Giving the same situation where the prisoners can talk to each other (coordinate), and if the experiment is run is only once, nothing will change. But if the experiment is more than once, the prisoners may opt to lie together.
Application
- Big company versus small company on new products.
Benc Tan 