When decision-makers face incentives that make it difficult to achieve mutually beneficial outcomes, we say they are in a(n):

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The prisoner's dilemma is a well-known game theory concept used to understand situations where individuals or organizations face incentives that make it difficult to achieve mutually beneficial outcomes. In this dilemma, each player chooses a strategy, which affects the outcome for both players. However, due to conflicting incentives, the Nash equilibrium (where neither player can improve their outcome by changing their strategy) often results in a suboptimal outcome for both parties. This is a common scenario in business and politics, where two parties have competing interests and must choose between cooperation and self-interest.

When Decision-Makers Face Incentives That Make It Difficult to Achieve