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Individual rationality sometimes leads to collectively irrational outcomes, a fundamental problem in the social and life sciences that has attracted sustained attention from experimentalists in sociology, psychology, biology, and economics. But what is it about individual rationality that sometimes gets us into trouble? Is the problem the egoistic pursuit of individual self-interest? Or does the problem with individual rationality lie elsewhere? To find an answer, this chapter closely examines the theoretical and experimental literature on social dilemmas, to see how researchers identify the source of the problem. The review suggests that the prevailing theory wrongly points to egoism as the problem. Failing to do what is best for everyone can also happen among rational altruists, and sometimes egoism is needed to prevent it. The chapter concludes by pointing to what we believe is the fundamental problem – a tension not between individual self-interest and collective welfare, but between individual autonomy and collective interdependence.

The globalization of retailing is occurring at an accelerating pace. For cost, quality, and style and fashion reasons retailers look worldwide for manufacturers and vendors that can meet their customers’ needs. Uses game theory to examine the conflict issues that can arise in retailer‐ international vendor relations. The game is a traditional prisoner’s dilemma in which equilibrium is non‐ co‐ operation even though co‐ operation would lead to gains by both retailer and vendor. Discusses the problems in achieving co‐ operation and the consequences of the prisoner’s dilemma. Presents four basic strategies for improving co‐ operation and vendor relations.

In this work, the author explores the specific structural conditions that render multilateral arms control agreements problematic by situating their dynamic in a three-person Prisoner’s Dilemma game. The addition of even a third state to an arms race compounds many times over the structural difficulties that face two racing states. Nevertheless, even in multilateral arms races, conditions exist that make it rational for all participating states to pause. The most salient of these conditions is the existence of a coalition that is collectively rational for a subset of the racing states. It was suggested that if such a coalition exists naturally, or if one forms as a result of a exogenous shock to the system, then it is possible for it to offer incentives to all states not in the coalition to join it and, at the same time, increase the payoffs to the original members of the coalition. Thus, if such a coalition exists, then the possibility also exists that all the participating states could be induced to stop arming. Nonetheless, the major lesson that should be drawn from this chapter is the realisation that the conditions under which multilateral arms races might rationally be terminated are generally quite restrictive.

The purpose of this paper is to examine whether education and training affect pro‐social behavior. Economics students are often accused of being less pro‐social. The explanations given are that less pro‐social people choose to study economics or that economics studies indoctrinate students to selfish behavior. The paper experimentally tests these postulations.

The paper uses the prisoner's dilemma game and stag hunt game to study cooperation across different groups of students.

The experiment supports neither of the postulations: economics students would be indoctrinated or less pro‐social people choose to study economics. However, the study shows that police cadets, who go through an education where teamwork and cooperation is promoted, become more cooperative and pro‐social after their completed education.

In contrast to earlier studies, this paper does not simply study economics students, but also examines if students in educational programs that promote loyalty and cooperation and encourage teamwork are more pro‐social than other students.

To investigate if game theoretic reasoning may be used to explain a lack of cooperation in buyer‐supplier relationships within construction and facilities management. In order to make an empirical application of the prisoner's dilemma (PD) game, possible important variables are operationalized and empirically measured.

Empirical data concerning pay‐offs and the variables in the discount parameter formula (created in this paper) have been obtained through interviews with clients and contractors in the Swedish construction sector.

This paper suggests a way to operationalize pay‐offs and the discount parameter, making empirical measurements possible. Owing to differences in pay‐offs and the discount parameter, different forms of contracts will affect cooperation. Cumulative values of cooperation are much higher in lasting relationships than in occasional transactions. Thus, the best way to facilitate cooperation between rational players is long‐term contracts.

Since, the values used are based on empirical data collected from a few respondents, they should be viewed as illustrative empirical examples, rather than statistical generalizations.

From a game theoretic perspective the practice of project partnering may not solve problems regarding lack of cooperation. To increase the incentives for cooperation, the actors should work together in long‐term relationships instead of focusing on single projects. Long‐term strategic partnering is, therefore, beneficial for the construction and management of facilities.

This paper makes empirical application of the PD game possible by operationalizing and empirically measuring game theoretic variables that previously have been given values set by the researcher rather than by the players in the game.

Some research in the area of make‐buy decisions for new technologies suggests that it is a good idea for a company to pursue a fairly rigorous “make” policy in the early days of a potentially disruptive innovation. Other studies prescribe exactly the opposite, promoting instead a “buy” strategy. Drawing from observations and lessons from the Prisoner's Dilemma, this paper seeks to bridge the gap between these perspectives by suggesting that both strategies are valid, but that they are most successfully applied in different market environments. The “make” prescription may be more suited to either extremely fast or extremely slow rates of technological change, while a “buy” strategy might be more appropriate in market sectors where technologies evolve at a medium pace. This paper highlights the importance of industry clockspeed and supplier relationships in make‐buy decisions for new technologies, and puts forward two new hypotheses that require empirical testing.

Commentators have claimed that business schools encourage unethical behavior by using economic theory as a basis for education. We examine claims that exposure to agency theory acts as a self-fulfilling prophecy, reducing ethical behavior among business students. We experimentally test whether economics coursework or a manipulated competitive vs. cooperative frame affects measured ethical behavior in simulated decision settings. We measure ethical behavior using established tasks. We also measure ethical recognition to test whether agency theory reduces recognition of ethical issues. Exposure to agency theory in either prior classwork or the experiment increased wealth-increasing unethical behavior. We found no effect on unethical behavior that does not affect wealth. We found no effect of exposure to agency theory on ethical recognition. Usual laboratory experiment limitations apply. Future research can examine why agency theory reduces ethical behavior. Educators ought to consider unintended consequences of the language and assumptions of theories that underlie education. Students may assume descriptions of how people behave as prescriptions for how people ought to behave. This study contributes to the literature on economic education and ethics. We found no prior experimental studies of the effect of economics education on ethical behavior.

The aim of the paper is to analyze the impact of cooperativeness of managers who occupy central positions in interaction networks on the performance and stress levels of a whole organization.

To explore this relationship, a multi-parameter agent-based model is proposed which implements the prisoner’s dilemma game approach on a scale-free network in the NetLogo environment. A description of the socioeconomic aspects and the key concepts implemented in the model is provided. Stability and correctness have been tested through a series of validation experiments, including sensitivity analysis. The source code is available for further exploration and testing.

The simulations revealed that improving the stress resistance of all employees moderately increases organizational performance. Analyzing managers’ roles showed that increasing only the stress resistance of managers does not account for significantly higher overall performance. However, a substantial increase in organizational performance and a decrease in stress levels are achieved when managers are unconditionally cooperative. This effect is stronger for the lowered stress resistance of employees. Therefore, the willingness of managers to cooperate under all circumstances can be a key factor in achieving better performance and building a more pleasant, stress-free working environment.

This paper aims to present a model for analyzing cooperation, specifically in the organizational context, extending the prisoner’s dilemma with novel concepts and mechanisms. Although the results confirm the existing theories about the importance of central nodes in complex networks, they also provide further details on how the cooperative behavior of central nodes (i.e. the managers) might benefit the organization.

The purpose of this paper is to analyze the supply chain's resilience in crowd networks from both static and dynamic perspectives.

This paper first defines the supply chain’s resilience, then proposes a graphical and game-theoretic framework to evaluate the resilience.

In this framework, an equilibrium with high resilience will be achieved after the iterated prisoner's dilemma in the supply chain. The two-stage update mechanism contributes to higher profits, higher stability and stronger risk resistance capability. The reputation-based tit-for-tat strategy in the second stage helps to realize society cooperation.

This work pays more attention to the dynamic evolution of interactions between organizations in the supply chain. It provides an important theoretical basis for future work such as how to effectively control and guide the evolution of events in the intelligence network and how to stand sudden changes and avoid collapse.

Trust is a crucial element of a viable banking industry. In the corporate market though, the characteristics of the relationships between each corporate customer and the bank is a double-sided problem. Both parties might trust the other or choose to behave opportunistically. The paper aims to discuss these issues.

The authors have analyzed the effects of inter-organizational trust and opportunism on the perception of risk. The paper presents a structural equations model based on a prisoner's dilemma logic to analyze the unique effects of trust between corporate customers and their banks and its corporate customers.

The results based on 252 bank – corporate bank customers relationships reveal an intriguing mixed strategy between trust from one party and opportunism from the other.

The implication is that mutual trust seems to reduce the perception of risk in the market while bank opportunism significantly escalates perceived risk. The analyses also show that when the corporate customer trusts the bank, perceived risk is significantly reduced.

The findings emphasize the role of relationship marketing in the banking industry.

Despite the fact that inter-organizational trust is a crucial dyadic variable, few empirical studies have previously analyzed both sides of the relationship. This investigation is a preliminary analysis of how both sides of the same relationship affects the outcome. When trust erodes from one side of the relationship, it may lead to the same process on the other side of the relationship.