Prisoner's dilemma

A game frequently displayed in cop dramas on the telly. Two partners in crime are separated into separate rooms at the police station and given a similar deal. If one implicates the other, he may go free while the other receives a life in prison. If neither implicates the other, both are given moderate sentences, and if both implicate the other, the sentences for both are severe. Each player has a dominant strategy to implicate the other, and thus in equilibrium each receives a harsh punishment, but both would be better off if each remained silent.

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Stochastic models

Liability-matching models that assume that the liability payments and the asset cash flows are uncertain.


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