Volatility & The Prisoners’ Dilemma

The global capitalist system is in a state where each individual actor is trying to maximize their own short-term gain, even if it comes at the expense of long-term stability or the well-being of the group.

That often leads to suboptimal outcomes for everybody involved, analogous to the Prisoner’s Dilemma problem.

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Scroll down, you see I am writing this article to explain the infamous paper “Volatility and the Allegory of the Prisoner’s Dilemm” by artemis capital.

In the original problem, two criminal gang members are arrested and imprisoned. Each prisoner is in solitary confinement and cannot communicate with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge, but they have enough to convict both on a lesser charge.

Prisoner A is told that if he testifies against his accomplice and convicts him, he will be sentenced to only one year in jail. If he remains silent, he will be sentenced to three years. Prisoner B is given the same options.

If both prisoners remain silent, they will each serve only two years in jail.