Individual rationality leads to collectively suboptimal outcomes.
Flood and Dresher's 1950 game, named by Tucker. The uncomfortable part is that defection is individually correct: both players reasoning perfectly reach the outcome both prefer least.
In practice
- Two firms in a price war both cut, both lose margin, and neither can stop alone.
- Two neighbours who could each save by sharing a skip both hire one, because neither will move first.
- Further reading
- Wikipedia
- Subject
- Games & Strategic Interaction
- Essay
- The recurring shapes of conflict and cooperation