Prisoner's dilemma in the context of Armen Alchian

In international relations, the security dilemma (also referred to as the spiral model) is when the increase in one state's security (such as increasing its military strength) leads other states to fear for their own security (because they do not know if the security-increasing state intends to use its growing military for offensive purposes). Consequently, security-increasing measures can lead to tensions, escalation or conflict with one or more other parties, producing an outcome which no party truly desires; a political instance of the prisoner's dilemma.

The security dilemma is particularly intense in situations when (1) it is hard to distinguish offensive weapons from defensive weapons, and (2) offense has the advantage in any conflict over defense. Military technology and geography strongly affect the offense-defense balance.

In economics and game theory, a participant is considered to have superrationality (or renormalized rationality) if they have perfect rationality (and thus maximize their utility) but assume that all other players are superrational too and that a superrational individual will always come up with the same strategy as any other superrational thinker when facing the same problem. Applying this definition, a superrational player who assumes they are playing against a superrational opponent in a prisoner's dilemma will cooperate while a rationally self-interested player would defect.

This decision rule is not a mainstream model in game theory and was suggested by Douglas Hofstadter in his article, series, and book Metamagical Themas as an alternative type of rational decision making different from the widely accepted game-theoretic one. Hofstadter provided this definition: "Superrational thinkers, by recursive definition, include in their calculations the fact that they are in a group of superrational thinkers."

In economics and game theory, complete information is an economic situation or game in which knowledge about other market participants or players is available to all participants. The utility functions (including risk aversion), payoffs, strategies and "types" of players are thus common knowledge. Complete information is the concept that each player in the game is aware of the sequence, strategies, and payoffs throughout gameplay. Given this information, the players have the ability to plan accordingly based on the information to maximize their own strategies and utility at the end of the game. A typical example is the prisoner's dilemma.

Inversely, in a game with incomplete information, players do not possess full information about other players. Some players possess private information, a fact that the others should take into account when forming expectations about how those players will behave. A typical example is an auction: each player knows their own utility function (valuation for the item), but does not know the utility function of the other players.

Merrill Meeks Flood (1908 – 1991) was an American mathematician, notable for developing, with Melvin Dresher, the basis of the game theoretical Prisoner's dilemma model of cooperation and conflict while being at RAND in 1950 (Albert W. Tucker gave the game its prison-sentence interpretation, and thus the name by which it is known today).

Melvin Dresher (born Dreszer; March 13, 1911 – June 4, 1992) was a Polish-born American mathematician, notable for developing, alongside Merrill Flood, the game theoretical model of cooperation and conflict known as the Prisoner's dilemma while at RAND in 1950 (Albert W. Tucker gave the game its prison-sentence interpretation, and thus the name by which it is known today).