The Prisoner’s Dilemma and Rational Irrationality.pdf

11. THE PRISONER ’S DILEM MA AND RATIONAL IRRATIONALITY As th probl ms of pollution and fr riding mak cl ar, many typ s of mark t failur com down to th fact of human int rd p nd nc . What I do aff cts your w lfar ; what you do aff cts min . Th sam appli s in busin ss. Wh n G n ral Motors cuts its pric s or off rs int r st-fr loans, Ford and Chrysl r com und r pr ssur to match GM’s d als, v n if th ir financ s ar alr ady str tch d. If M rrill Lynch s ts up a h dg fund to inv st in collat raliz d d bt obligations or som oth r n wfangl d s curiti s, Morgan Stanl y will f l oblig d to launch a similar fund so its w althy cli nts don’t d f ct. Now, th chairm n of th Big Thr automak rs, d spit all th criticism th y hav r c iv d r c ntly, ar pr sumably fairly rational, int llig nt f llows who would rath r co xist p ac ably than g t into damaging comp tition. (For now, w will s t asid th m ntal capaciti s of Wall Str t CEOs.) Isn’t th r som way th y can g t tog th r and work out solutions that ar b n ficial to ach of th ir compani s and to th ir custom rs, too