The Prisoners’ Dilemma shows that people can get what they want more effectively by cooperating with each-other, rather than acting in isolation. Cooperation is only possible, however, if the players are able to overcome the barrier of trust and communication. If they are unable to surmount this barrier they will not be unable to cooperate, even if cooperation would be in their best interests.
In real life almost everything people do, can be done more effectively through cooperation. A group working together on a task is more efficient than a collection of individuals each working on their own.
What is the ideal size for a group of people working together on a task? In order to work cooperatively together, the members of the group need to overcome the barrier of communication and trust: they need to learn to talk to each-other, build trust, and negotiate to find a way to work together that suits everyone. As more people are added to the group, the barrier of communication and trust gets higher, and more compromises have to be made in order to find a way of working together that will satisfy everyone. Thus for a given task or project there should be a sweet spot: an ideal number of people, to bring the advantages of cooperation without a too-high overhead of communication and trust.