Management, Prisoners Dilemma and the Tragedy of the Commons

Understanding The Prisoners Dilemma

Let us say that there are 2 people (A & B) who have a charge of theft brought against them. Both of them are kept in separate rooms where they cannot communicate amongst themselves in any manner and neither know what the other has chosen.

The options that are provided to them are :-

a) If the person (A) confesses to the crime and the other(B) does not confess, the person to confess(A) goes free and (B) gets 3 years. The same is true when B confesses and goes free , and A does not confess and gets 3 years.

b) If both (A and B) confess then both get 2 years of prison time.

c) If both (A and B) do not confess then both of them go for 1 year of jail time.

Clearly, in this case the rational decision for both of them is to go without confessing. We are able to reach this conclusion looking from a third party view.

Looking at the situation from A’s perspective.

A does not know if B will confess or not.

Lets say he assumes B confesses, in this case its better for him to confess, as then he only gets 2 years. If he does not confess, he will get 3 years.

Lets say he assumes B does not confess, in this case its better for him to confess, as he goes free and if he confesses he gets 1 year.

From A, the better answer seems to be to confess.

A’s view
Penalties written in (A,B) format.

Similarly, when we look at it from B’s perspective, he also goes with confession.

Result — Both of them go to jail for 2 years, instead of the better answer of 1 year.

When both optimised the answer only for themselves, the ended up in a worse situation.

Tragedy of Commons

The tragedy of commons is Prisoners Dilemma applied at a larger scale.

Lets assume that there is a resource that is shared between few people, such as underground water.

The options provided to them are :-

a) If everyone pumps water for their irrigation at full rate, underground water would be consumed in 10 years.

b) If everyone pumps water for their irrigation, and you pump water at a lower rate, everyone else earns more money and you have less financial earnings. Assuming water used in irrigation as a direct co-relation with the farm production.

c) If everyone pumps water at a slow rate, everyone earns less money, but the water can be consumed infinitely.

Similar to the prisoners dilemma, from a neutral standpoint, the best answer is c, where you earn less money today, but continue to consume for infinite time.

Looking at it from lets say a single farmer A’s perspective.

a) Assuming everyone else is pumping water at the highest rate, best answer is to pump at highest rate. Pumping at a lower rate increases the life of underground water (only slightly) at a financial loss to A.

b) Assuming everyone else is pumping water at a lower rate, best answer again is to pump at highest rate. Pumping at highest rate increases the financial benefit at the cost of others.

Why A chooses to pump at higher rate

Here again, optimising for individual solution lead to a solution which was not optimal.

Solution to Prisoners Dilemma

When the prisoners dilemma was executed over multiple (close to infinite) number of executions, the best solution is “tit for tat”.

In the first execution you co-operate (i.e. choose the answer that is optimally best, to not confess). In the next turn you choose the answer chosen by the other in previous round. If the other chooses not to confess as well, you build trust and continue on the optimal path.

Solution to Tragedy of Commons

If we try to apply “tit for tat” in the tragedy of commons, we see it escalates very quickly.

Assuming a population of 26 people (numbered A…Z). Assuming everyone starts with the optimal answer of pumping less. Lets say there is a defection B, everyone else now translates to pumping more. From here going back to the optimal answer is not possible, even if B starts co-operating, the rest of the population does not (as there are numerous others who are non-co-operative).

Also, the psychological tendency that the losses are distributed over a wide number of people, leads to defection quickly and a very long period before co-operation is achieved.

The solution hence resides only by adding a rule and its enforcement to ensure optimal answer.

What does Prisoners Dilemma mean in Management

From the management perspective, prisoners dilemma plays an important role in decision making when the manager and another person is involved.

One such example could be as follows :-

Co-operate from a manager — allowing B to work independently

Non co-operate from a manager — micro managing B

Co — operate from the person — working on project at hand

Non co-operate from the person — working on side project.

The constraints (taking some values in Rs as a proxy for the output) :-

a) If both manager and person (A & B) co-operate the output is Rs 1000 and B gains 500.

b) If A co-operates and B does not, the output is of Rs 0 and B gains Rs 1500.

b) If B co-operates and A does not, the output is of Rs 1500 and B gains Rs 0.

c) If both do not co-operate the output is Rs 800 and B gains Rs 200.

Gains written in (Manager,Person) format

Clearly again, the best answer is to co-operate, yet the same flaws of prisoners dilemma happen and the non-optimal answer is reached.

How to solve?

Use ‘Tit for tat’. Start with the assumption the person is co-operative. On the first instance of non-co-operation, use non-co-operation method till again a co-operation is established.

Understanding the Prisoners dilemma and its constraints, will help in situations where it can be used in management to move from an non-optimal to optimal answers

Have you ever faced Prisoners Dilemma while making a decision? Do share the instance in the comments section

Management and the Tragedy of Commons

Tragedy of commons comes into the picture when multiple people are involved.

One such example could be say you are working in a large team. Lets say that the task at hand has a financial impact for the organisation when completed in a fixed amount of time. The time can only be achieved when everyone works on weekends. Also, lets assume that completing the project on time allows for a gain to self over a long period of time (less today compared to the gain of other project today, yet larger when summed over a longer period).

The constraints :-

a) If you work on weekend and no one else, the timeline is not met. You loose time that could be used for other projects.

b) If all other work on weekend and you do not, the timeline is met. You have time that you utilise for your other projects.

Why A decides not to work

Hence, the same tragedy of commons happen, and no one works to complete the project on time, leading to overall non-optimal solution.

How to solve?

The solution to tragedy of commons is to create rule and enforcing them. To solve for this situation, create a rule that needs to be adhered and enforcing them would remove the tragedy.

Another example. Lets say you have to make a decision to solve a problem today or in the future. You have the option of putting a patch today. If everyone around you is putting up patches, you are better of patching it. If everyone around you is solving it deeply, you still are better of patching. It provides better visibility to your managers of having solved a problem quicker then others (though to a cost unknown to them for now).

Similarly, when working towards a promotion, the quicker answer is to get there through networking, rather then working from the ground up. You are better of choosing this shortcut when optimising from your single frame.

Yet, with this understanding of this phenomena we can now state that it is avoidable, knowing when this is happening.

Please note — There are many other factors as well playing a role in all circumstances, apart from these. It may not be straightforward to know and apply the solutions. These need to be used along with other factors.

For an individual -

a) If this is happening with the team, create a process and enforce the process to solve for it.

b) If you are a participant, and rules do not exist, do not engage in taking the shortcut or the un-optimal answer even if it is the best one in the short term.

Always remember,

i) The work you do without taking shortcuts is the correct answer, ethically, morally as well as in the long term.

ii) Do not think of the work in short term. Do not think of your work as a stepping stone for something higher, the higher will never happen, and taking shortcuts will become your nature and a habit which will not leave you even when you want.

iii) You are in the position of taking decision so make them wisely. Short term answers may benefit you in short term, and will harm you in the long term.

Have you ever faced the tragedy of commons while making a decision? Do share in the comments section.

Is this also the tragedy of commons?

With an increase in global environment temperatures, we are more and more dependent on AC, Coolers, fans etc. We use these to keep the environment around us at a lower temperature than the natural temperature.

By using more (and longer duration) of these equipments which are run on electricity, and most of the electricity being produced through thermal power plants (run on coal and petroleum products), we are increasing the rate of increase of the temperatures. Does this qualify as a tragedy of the commons?

If yes, then we know the solution.

I am passionate about designing and developing complex systems that impact people’s life. A avid reader and a believer of multi-disciplinary teaching.

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