during the interrogations, each prisoner is offered the choice to rat on the other. if neither rats the other out, they will both be set free. if one rats the other out, the rat goes free and the one he ratted out will get a long sentence. if both rat each other out, they'll both receive a light sentence.
the prisoner's dilemma is: rat the other out? or stay silent, and hope he doesn't turn witness against you?
the logical act is to rat, even though, if nobody ratted anyone out, everyone would benefit. the individual rational act leads to a group irrational behavior.
every winter, the city of chicago gets lots of snow. the city doesn't bother plowing side streets. so residents dig out their own cars. people put lawn chairs and egg crates in "their" spots after they pull out, trying to mark the public street as their private spot, since they dug it out.
the greater common good of public parking is harmed by individuals who don't work to get their streets plowed, instead turning against each other and settling for crappy dug out spots. surrounded by mud. yuck.
the prisoner's dilemma: mark the spot i dug out with egg crates? or leave it unmarked, and risk coming back to someone else's car in "my" spot? (or even worse, someone else's god damn egg crates! and this does happen.)
to work for the common good? or try to accomplish individual goals?