prisoner's dilemma

Classical game theory problem. Two people are arrested and placed in separate cells. They are each offered the chance to confess, with the following three outcomes told to them in advance. The first outcome is that neither prisoner confesses; if this happens they will both spend three years in prison. The second outcome is that both of them confess, in which case they both receive four years. The third outcome is that one confesses and the other does not, in which case the prisoner who confessed receives two years and the one who did not has to spend twelve years in prison. The best outcome for both of them collectively is for neither to confess, thereby receiving just three years in prison. However, if one believes the other will not confess then they can reduce their sentence to two years by confessing. Alternatively, if they believe the other will confess, they must also confess in order to avoid getting twelve years. So, logic drives them both to confess. This situation is used in economics and business strategy to show the relative merits of acting in concert or individually.