Two alternate regulatory approaches can be used to reduce exposure to environmental tobacco smoke in workplaces. The first is voluntary, self-regulation introduced by management, which is supported by common law and occupational health legislation that emphasises the employers' 'duty of care'. The second is public health legislation that bans smoking outright in enclosed places. In Australia, self-regulation has succeeded in restricting tobacco smoking in most indoor workplaces but has been a relative failure in the hospitality industry. Claims that this reflects consumer preference by diners, club and hotel patrons are not backed by survey evidence, typically showing large majority support for non-smoking establishments. Insights from game theory show why reliance on the duty of care is unlikely to succeed even when establishment operators collectively support a non-smoking policy. Using plausible assumptions about the net costs of unilaterally introducing smoking restrictions, what makes good sense for society as a whole is likely to be the least profitable option for an individual operator acting alone. Operators find themselves in the classic prisoner's dilemma. If the aim of policy is to restrict smoking in public places in order to protect the health of employees then game-theory predicts that public health legislation banning smoking in enclosed places will be more effective than self-regulation and reliance on the duty of care.