[...]I ended up using all kinds of dark arts to make him play worse (e.g. verbally humiliating him after each blunder of his -- I had the impression he was about to break down and cry)

This is also one of the things people actually do in those videogames, unfortunately. If someone really wants that sword, they won't shy away from sending threatening /whispers and using all kinds of verbal abuse/trickery. In situations like the prisoner's dilemma, I suspect a favorite of many a younger gamer (think young teen) would be "You're too chicken to Cooperate! Go on, be the sissy and Defect!".