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Social dilemmas in Behavior Economics

Social dilemmas are simple situations between a pair of people, to a group of people, that involve making decisions that will ultimately affect their well being and the well-being of the overall group. The ‘players’ in the social dilemma have the choice to cooperate to which is known as taking the best interest for the group or taking the action for self interest known as defecation. In the situations, it is always better if the people decide to coordinate and cooperate amongst each other for gain of the overall group.

An example could reflect sales with commission attached. If the pair works together they may be both able to sell more products to customers, example, one sells a TV the other sells the associated accessories, rather then them competing against each other (both defecting) looking out for their own self interest which would lead to them both only getting (Say) 4 rather than 8. Therefore they have the incentive to cooperate. However, if one decides to cooperate and the other one doesn’t, the result is that the one ‘cheating’ will make significant gains but essentially take actions against the best interest of the group and consequently force wages from the other person and get 6 units less for the other person. Therefore, the incentive to ‘cheat’ also exists with the incentive to cooperate.

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