Are you facing the Prisoner’s Dilemma without realizing it?
You’ve probably heard of the Prisoner’s Dilemma: Two suspects. One deal on the table. If they both stay silent, they both get light sentences. If one confesses, they walk free while the other gets punished. If both confess, they both lose.
The twist? Even if they agreed to stay silent beforehand, once separated, each must act alone — with no guarantee the other will stick to the plan. Acting in pure self-interest leads to worse outcomes for both.
In B2B negotiations, this dilemma shows up more often than you think:
- Two suppliers independently decide whether to honor a non-compete gentlemen’s agreement — or secretly undercut each other.
- Two business units must decide whether to share critical knowledge — or hoard information to boost their own standing.
- Two companies agree to maintain pricing discipline in a fragmented market (without collusion), but each privately weighs whether to defect for short-term gains.
How to Navigate It
In Prisoner’s Dilemma settings, trust and relationship structure are key. You need to either remove the opportunity to defect — or change the game.
Here’s how:
✅ Limit the possibility to defect: Wherever possible, install contractual safeguards, verification procedures, or auditing rights — so that deviating from the agreement is both risky and costly.
✅ Increase transparency: Create mechanisms where actions are visible — making betrayal riskier and easier to detect.
✅ Use contingent agreements: Tie your concessions to verifiable actions (“If you do X, then we will do Y”) to enforce cooperation step by step.
✅ Build repeat interactions: When players know they’ll meet again, the incentive to defect weakens as there is opportunity to retaliate. Frame deals as ongoing relationships, not one-offs.
✅ Start by cooperating — but protect yourself: Use the Tit-for-Tat approach: cooperate first, mirror their behavior after. It rewards collaboration without being naive.
✅ Strengthen shared incentives: Highlight and structure mutual long-term gains, making it more profitable to collaborate than to cheat.
In negotiations, recognizing when you’re trapped in a Prisoner’s Dilemma — and knowing how to shift the structure — can make the difference between lasting success or destructive outcomes.
👉 This is the first part in a series on negotiations mindsets through the lens of game theory. Follow along as we unpack more real-world “games” behind B2B negotiations.
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