It is a classic example of a game. Consider two suspects for a murder against whom there is insufficient evidence. They are lodged in separate cells and questioned separately.

These are the possibilities:

• Neither suspect confesses. They would be let off then as the evidence against them is not sufficient.
• Both can confess, thus incriminating them. They would be behind the bars.
• If one confesses but the other does not, then the confessor gets the benefit and the non-confessor will be punished.

Would they confess? Game theory shows that what the suspects would do differs from what they should . Here the suspects make a decision privately — without any communication with the accomplice in crime.

He could reason, confessing puts me at an advantage. I confess and as a welcher get the benefit, assuming the other would not confess. He is thus better off confessing. But the same thinking also occurs in the brain of his co-suspect. That leads him to confess too. That results into punishment to both the suspects. This is called Nash equilibrium. If an individual acts privately, trying to do the best for himself, he often ends up in outcomes in which everyone in the group is worse off.

Nash worked on such non-cooperative games. That earned him PhD and later a Nobel. The basic assumption of game theory is that people are rational.

There are situations where everyone could lose, or everyone could gain.