Final answer:
The classic Prisoner's Dilemma involves two prisoners who must decide individually to confess or remain silent. Each has a dominant strategy to confess for a lesser sentence, yet if both remained silent, they would collectively serve less time. This situation showcases how individual self-interest can lead to a suboptimal collective outcome.
Step-by-step explanation:
The scenario described is a classic example of the Prisoner's Dilemma, a fundamental concept in game theory. In this situation, two co-conspirators are arrested and offered a deal to reduce their prison time if they confess and implicate the other. However, they are placed in separate interrogation rooms, and without knowing what the other will do, each faces the dilemma of whether to confess or remain silent.
If neither prisoner confesses, they both serve shorter sentences. The police tell each prisoner that if they confess and their partner remains silent, they will receive a reduced sentence, while their partner will receive a longer sentence. However, if both prisoners confess, they receive significantly longer sentences than if both had remained silent. This creates a scenario where each prisoner has a dominant strategy to confess, even though they would collectively serve less time if both remained silent. The optimal collective outcome is undermined by the individual incentives to betray their partner.