The correct answer is Option 3: A situation under the Game Theory.

The term "Prisoner`s Dilemma" refers to a classic problem in the field of Game Theory, which is a branch of mathematics that studies strategic decision-making. The scenario involves two individuals who have been arrested and are being interrogated separately. Each prisoner has two choices: cooperate with the other prisoner by remaining silent or betray the other prisoner by confessing. The outcomes of their choices depend on how the other person behaves.

If both prisoners remain silent (cooperate), they receive a relatively light sentence. If both prisoners betray each other (confess), they receive a moderate sentence. However, if one prisoner cooperates while the other betrays, the betrayer receives a significantly reduced sentence (reward) while the cooperating prisoner receives a harsher sentence (punishment).

This dilemma arises because each prisoner must decide whether to trust the other person to cooperate or betray. Regardless of the other prisoner`s choice, it seems advantageous for each prisoner to betray to secure a better outcome for themselves individually. However, if both prisoners follow this logic, they both end up worse off compared to if they had both cooperated.

The Prisoner`s Dilemma highlights the tension between individual rationality and collective rationality. It demonstrates how self-interest can lead to suboptimal outcomes when individuals cannot trust or coordinate with each other. This dilemma has applications in various fields, including economics, political science, and evolutionary biology, to study cooperation, competition, and decision-making in social interactions.

To summarize, the Prisoner`s Dilemma is a situation under the field of Game Theory, where individuals face a conflict between cooperation and betrayal, and it exemplifies the challenges of decision-making in strategic interactions.