Prisoner’s Dilemma Takes Flight

Prisoner’s Dilemma is one of those simple but powerful “game theory” tools that most of us encounter in an economics course at some point in our academic travels.  Wikipedia describes the classic set-up:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (defects from the other) for the prosecution against the other and the other remains silent (cooperates with the other), the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

Researchers have discovered that if two people play it repeatedly, they get punished enough by each other, and by their own bad decisions, that they eventually reach something approaching a peaceful equilibrium.

The problem with most real crooks, however, is that they only get one chance to play it, and it’s always when the stakes are painfully high.

And it often seems to be crooks that skipped their economics classes.

If you’ve been keeping up with the “balloon boy” and his family over the last few weeks, we might actually be watching an instance of Prisoner’s Dilemma playing out in the national media.

Mayumi and Richard Heenes, featured on Wife Swap (and apparently longing for more notoriety), called 911 a few weeks ago, emotional and desperate, to report that their six-year-old son had taken off in a giant Mylar balloon from their backyard.  The press was transfixed.  I received email updates all afternoon from CNN and the WSJ.

Yet, when the balloon landed, six-year-old Falcon was found hiding in the attic, part of what appears to be a staged stunt.

If there were ever two criminals who might actually get their stories straight in advance, they might be the married kind of criminals.  Nevertheless, USA Today yesterday reported that Mayumi, in an affidavit, has admitted the whole thing was a stunt.

Mayumi described that she and Richard Heene devised this hoax approximately two weeks earlier. ... She and Richard had instructed their three children to lie to authorities as well as the media regarding this hoax," the affidavit said.

Richard Heene has denied a hoax. His lawyer, David Lane, said Friday he is waiting to see the evidence in the case.

"Allegations are cheap," Lane said.

That's called big-time defection.

You’ll find Wikipedia’s further description of Prisoner’s Dilemma to be instructive:

The unique equilibrium for this game is a Pareto-suboptimal solution, that is, rational choice leads the two players to both play defect, even though each player's individual reward would be greater if they both played cooperatively.

In the classic form of this game, cooperating is strictly dominated by defecting, so that the only possible equilibrium for the game is for all players to defect. No matter what the other player does, one player will always gain a greater payoff by playing defect. Since in any situation playing defect is more beneficial than cooperating, all rational players will play defect, all things being equal.

That’s the classic game theory description for what’s going on in balloongate, and what's happening to Richard Heenes (and his lawyer).

Now, let me explain Mr. Heenes’ legal strategy in my own game theory terms, ones that require no course in economics: Go directly to jail.  Do not pass Go.  Do not collect $200.

Posted by Entrepreneur Generations

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