By W. B Lockwood
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They surely would reason"in the following manner: 'if we both confess, we each spend ten years in prison. If we both agree to "stonewall" it, we'll get a minor two-year term. ' Now of course if prisoner A believes prisoner B will not, in fact, confess, it is in his best interest to confess immediately, and likewise for prisoner B. The dilemma is clear: to trust or not to trust. 2 GROUP RATIONALITY There is a wealth of experimental data on subjects forced, by psychologists, to play this game .
4 EXCHANGE AS A GAME The preceding discussion can be rephrased in terms of game theory. By taking this approach Shubik  was able to establish the validity of Edgeworth's conjecture and open a new area of economic theory. The problem with trading, however, is that in general there are more than two players; the complicated tools of X-person game theory must therefore be elucidated. Without delving too deeply into such matters, it should be apparent that, for Xperson co-operative games, the phenomenon of coalition forma61 tion plays a major role.
If the two prisoners thought as one, or if an impartial referee (lawyer) were to give binding counsel to the prisoners, the (As,Bs) strategy of mutual non-confession would certainly be chosen, and would, too, qualify as an equilibrium outcome. In short, the strategy pair (AT,B T) is 'rational' for the individuals qua individuals, while the pair (AN,BN) is 'rational' for the group of individuals. What is 'best' for the individual is not necessarily what is 'best' for all individuals as a collective entity - the pursuit of individual advantage leads to a socially undesirable outcome.
An introduction to modern Faroese by W. B Lockwood