Tit-for-Tat Strategy
This creates stable equilibrium where both parties benefit from cooperation while defection becomes irrational due to certain retaliation.
Tit-for-tat strategy emerges in iterated games: Cooperate initially, then mirror partner's last move. If they cooperated, cooperate. If they defected, defect once then offer cooperation again. This strategy wins iterated prisoner's dilemma tournaments because it's: Nice (never defects first), Retaliatory (punishes defection immediately), Forgiving (returns to cooperation after single punishment).
Single-round game: Defection is rational (you either get +5 or +1, better than +3 or 0). Repeated game: Cooperation is rational if future gains exceed immediate defection benefit.
Business Application of Tit-for-Tat Strategy
In business coalitions, tit-for-tat manifests as: cooperate initially (give benefit of doubt), punish defection immediately but proportionally, return to cooperation after punishment. This creates stable equilibrium where both parties benefit from cooperation while defection becomes irrational due to certain retaliation.