According to Bertrand Russell " 'Reason' has a perfectly clear and precise meaning. It signifies the choice of the right means to an end that you wish to achieve". This is the interpretation of 'reason' that most contemporary philosophers favor. However, many philosophers have pointed out situations where the concept of rationality seems to break down. The situations are those who strategic structures resemble that of the Prisoner's Dilemma.
An example of a multiple person Prisoner's Dilemma is as follows: Suppose that during a drought, a person must decide whether he should act in his own self-interest and water the garden or whether he should exercise restraint and conserve water. No matter what the other community members do, a person is always better off watering his garden because this is the right means to the end that he desires. The reasoning for this is that it is unnecessary for one person to exercise restraint if the most other community members are restraining as well. Even if the rest of the community doesn't exercise restraint, it is futile for just one person to do so since one person does not have that big of an impact on the whole water supply.
The paradox is that if the entire community reasons this way, the water supply will dry up completely but if each community member cooperates and exercises restraint (acts irrationally) the water supply will be spared. Moral philosopher, Derek Parfit, believes that cooperation, instead of being the irrational choice, can be a rational course of action. Parfit has proposed several solutions to the Prisoner's dilemma so that cooperation becomes the reasonable choice. One solution involves changing the entire structure of the game so that it is no longer a Prisoner's Dilemma. To do this, the payoff functions of each player should be changed in order to make it unprofitable for anyone to defect. In the case of the example given above, the payoff functions of each individual would change if there were a fine for watering the garden during a drought. Such a solution is considered a "political" solution and oftentimes these sorts of solutions cannot be implemented.
Parfit argues that an even better solution would be to find ways to make people cooperate for purely moral reasons. Parfit proposes that the way to achieve such a "moral" solution would be to educate society about the Prisoner's Dilemma and it's most desirable, though irrational solution.
Immanuel Kant's categorical imperative, which is intended to be a fundamental principle of morality, states: "Act only on such a maxim through which you can at the same time will that it should become a universal law." A maxim is just a personal rule of conduct while the universal law is the conduct of all people. Kant's categorical imperative is continually debated among moral philosophers because of its obscurity. Through the use of Game Theory, Kant's views can be clarified. Kant's beliefs, when understood, offers a moral solution to the Prisoner's Dilemma.
One of Kant's examples of categorical imperative is illustrated in the following maxim: "Always borrow money when in need and promise to pay it back without any intention of keeping the promise." This maxim cannot possibly made into a universal law because it cannot be made universal without creating a contradiction. That is, if this maxim was made universal, then everyone would break promises and a promise would have no meaning and therefore promises would cease to exist. Therefore, if this maxim were made universal, a logical contradiction would follow.
In terms of Game Theory, Kant's categorical imperative can be restated as follows: "Choose only a strategy which, if you could will it to be chosen by all the players, would yield a better outcome from you point of view than any other". This statement, then, becomes a solution to the Prisoner's Dilemma. That is, according to Kant's categorical imperative, only a cooperative choice can result. This is because the personal choice of defecting, if made universal, is in contradiction to one's personal interest (similar to the above example).
Through the use of Game Theory, Hobbes' argument, later made popular by Jean-Jacques Rousseau, for absolute monarchy can be reconstructed. Hobbes argued that, without some form of external constraint on people's behaviors, anarchy would ensue. Cooperation among people would be impossible since people act only to maximize individual welfare and not the welfare of society as a whole. Granted, there will exists altruists (maybe even many of them) who constrain their self-interests for the good of others. However, if even one self-interested person exists, he/she will exploit the altruists' constraints, profiting from both his/her absence of constraint and the altruist's unselfish behavior. As a result, Hobbes believes that it is psychologically unnatural for altruists to exist. If just one narrowly self-interested person exists no altruist can survive unless he/she becomes narrowly self-interested too. In such an environment, known as a State of Nature, Hobbes argues that a person must always be suspicious that another will attack in order to maximize his/her own self-interest. Therefore, in order for a person to maximize his best interest, he must attack the other person before that other person can attack. Each such conflict between two people in a state of nature has been termed as the "Hobbesian Dilemma." However, in the field of Game Theory, the Hobbesian Dilemma has the same structure as a "Prisoner's Dilemma."
Hobbes believed that the "Hobbesian Dilemma" results in a State of Nature because morality is an unstable enforcer of social cooperation. According to Hobbes, a stable enforcer can only exist if not one person can deviate from the established rule by which the rest adhere to. Since cooperation among people is biologically necessary, a stable enforcer must exist. Hobbes believes that the best form of social enforcement is the existence of an all-powerful sovereign.
The problem is of ensuring the fair sharing of network resources. For example, ten Stanford students on the same local network need access to the Internet. Each person, by using their network connection, diminishes the quality of the connection for the other users. This particular case is that of a volunteer's dilemma. That is, if one person abstains from using the network, the other people will be better off, but that person will be worse off.
If a centralized system could be developed which would govern the use of the shared resources, each person would get an assigned network usage time or bandwidth, thereby limiting each person's usage of network resources to his or her fair share.
As of yet, however, such a system remains an impossibility, making the situation of sharing network resources a competitive game between the users of the network and decreasing everyone's utility.
Of course, chances are that neither the crocodiles nor the ziczacs rationalize their behavior with game theory. But their behavior can still be modeled using game theory principles.
In the future, AI programs may be endowed with the ability to make new decisions unplanned for by their creators. This would require the programs to be able to generate new payoff matrices based on the observed stimuli and experience. A program that is able to do that would be capable of learning and would, in a lot of ways, resemble the human decision-making process.
Prisoner's dilemma is not the only game theory model which can be used to model economic situations. Other models can be applied to different situations and, in many cases, can suggest the best outcome for all parties concerned.