Human Relationships and Game Theory: Economics of Strategic Alliance and Trust

Should I show favor to someone, or just care for my own interests? How should I respond when betrayed by a trusted friend? These worries are in the realm of classical psychology, but they are also core themes of ‘Game Theory’ that can be analyzed with mathematical models.

Game theory studies how to derive the best result (strategy) in interdependent situations where my choice affects the other person’s choice, and the other person’s choice also affects me.

I. Prisoner’s Dilemma: Why is it Hard for Us to Cooperate?

The most famous model in game theory is the ‘Prisoner’s Dilemma.’ Two accomplices are given a proposal in separate interrogation rooms.

• If both remain silent (cooperate), both receive light punishment.
• If one snitches (betrays) and one remains silent, the betrayer is released and the silent one receives heavy punishment.
• If both snitch (betray), both receive medium punishment.

Objectively, the best result is with both cooperating, but each individual, due to fear that the other person might betray them, ends up choosing the worst result of ‘both betraying’ (Nash Equilibrium). This clearly explains why business partnerships or romantic relationships in modern society easily break.

II. Tit-for-Tat Strategy: The Strongest Survival Rule

Political scientist Robert Axelrod used computer simulations to find the most effective relationship strategy. The unexpected winner that defeated numerous complex AI strategies was ‘Tit-for-Tat,’ or ‘repaying as received.’

The Tit-for-Tat strategy is summarized in just four principles:

1. Be Nice: Cooperate first and show favor at the beginning.
2. Be Retaliatory: If the other person betrays you, immediately betray them in the next opportunity to give a warning.
3. Be Forgiving: If the other person returns to cooperation, immediately cooperate again without asking about the past.
4. Be Clear: Make it easy for the other person to understand your rules to increase predictability.

III. Premise a Continuous Game

The reason the Prisoner’s Dilemma is hard for cooperation is that it is a ‘one-time game.’ However, real human relationships are mostly ‘repeated games.’

If you have to see the person again tomorrow and maintain the relationship next year, we realize that the ‘long-term trust of cooperation’ is much larger than the ‘short-term gain of betrayal.’ Therefore, if you want to form a good relationship, it is important to make each other aware that this relationship is not a one-time thing.

Conclusion: Why Selfish People Cooperate

Game theory shows why humanity created devices called morality and trust: because they are advantageous for survival.

The act of reaching out your hand first to someone is not merely because you are nice, but an intellectual act of proposing the best strategy for long-term coexistence. If the other person tries to only exploit your favor, show them through the Tit-for-Tat strategy that you are not a pushover. Then, reach out your hand again. A true win-win is established only on calculated courage and clear principles.