Traveller's Dilemma

The Traveller's Dilemma is a game in which two players each name an integer in a bounded range (e.g. 180–300), are both paid the lower number, and the lower-bidder receives a small bonus while the higher-bidder pays a small penalty. Rational Iterated Dominance unravels every value above the floor — each player would always undercut the rival by one — collapsing the unique Nash Equilibrium to the minimum value (180), even though both players would be far better off coordinating on 300.

When to use

Cite the Traveller's Dilemma whenever you need an example where iterated elimination of dominated strategies leads to a socially terrible equilibrium that real players almost never reach — useful for arguing the limits of common-knowledge-of-rationality assumptions and for motivating bounded-rationality refinements.