The prisoner’s dilemma is a canonical example of a game analyzed in game theory that shows why two individuals might not cooperate, even if it appears that it is in their best interest to do so.
Quora has a few great examples:
- Nation-states stockpiling nuclear weapons
- Women wearing makeup
- Nation-states not restricting CO2 emissions
- Athletes using performance-enhancing drugs
- VCs bidding for Foursquare
- Advertisers determining ad budgets
- Other health-independent hygiene: shaving, deodorant, cutting hair
- OPEC & the game to control oil prices
Breaking down Women wearing make up:
Women wearing makeup. Society would likely be better off if we all didn’t. Each day across America, several million man-hours (woman-hours, actually) are devoted to an activity with questionable benefit for society. Foregoing makeup would free up fifteen to thirty minutes (just an estimate as to average makeup application time) for each woman every morning.
However, if no one wore makeup, then there would be great temptation for any one girl to gain an advantage versus everyone else by breaking with the norm, using mascara, blush, and concealer to hide imperfections and enhance her natural beauty.
Once a critical mass wears makeup, the average facade of female beauty is artificially made greater.  Bucking the trend and going au naturale means foregoing the artificial enhancement to beauty. Your beauty relative to what is perceived as average would decrease.
Most women therefore wear makeup. We end up with a situation that is not ideal for the whole or for the individuals but is based on rational choices by each individual.