You are a criminal, and you and your partner (for whom you have no feelings one way or the other) have committed an crime. Unluckily, you've both been caught, and you're being held in separate cells in a jail, with no way to talk to each other.
The crown attorney comes to talk to you, and says he's willing to make a deal with you. He's also offering the same deal to your partner, and you both know that. He says, "We have some circumstantial evidence on both of you, and if neither of you tells me anything we can still get both of you a year in jail, the way things stand right now. But - if you confess, and admit your partner was with you, then we'll let you off scot free because you were helpful, and he'll get three years in jail. Of course, if he confesses and you don't, then you're the one who gets the three years and he walks free. Now, if you both confess, then we've got you both dead to rights and you both get two years in jail."
The crown attorney leaves and goes back to his office, after telling you he'll be back in half an hour to get your answer. What do you do?
You can either "co-operate" with your partner - not confess - or "defect," and confess. If you defect, you either get 0 or 2 years in jail, depending on what your partner does. If you co-operate, you get either 1 or 3. Clearly, defecting is the better strategy.
Of course, the other fellow is thinking exactly the same thing. And when you both defect, you guarantee yourselves two years in jail. If only you had both co-operated, and gotten only a year! But if you co-operate and he defects, you get three while he goes free ...
This is the dilemma. Both people, by following their "best" strategy, do worse than if they had used another, apparently illogical plan.
This is something that I had observed in one of the StarTrek epsodes where Data is playing a game of chess and chooses to draw the game where the other player was only thinking of winning.. this was negating all the moves the other player was making and then forced him to make a mistake. on the other hand if the other player would also have tried to draw the game ,, there would be better result for both of them.. Interesting...