No, he means Defect-Cooperate should give the person who lost less than he would have gotten from Defect-Defect.
For example, in the Prisoner's Dilemma you might get 0 years of jail time if only you defect, 1 year if you both cooperate, 3 years if you both defect, and 10 years if only the other person defects. Then, knowing that the other person will defect it is still in your best interest to defect as well.
In this challenge, if you know that the other person will defect you automatically get $0, whether you defect or not. In that case there is no particular reason for you to defect (except out of spite) and you are better off with the hopes that your opponent will keep his promise than with nothing.
For example, in the Prisoner's Dilemma you might get 0 years of jail time if only you defect, 1 year if you both cooperate, 3 years if you both defect, and 10 years if only the other person defects. Then, knowing that the other person will defect it is still in your best interest to defect as well.
In this challenge, if you know that the other person will defect you automatically get $0, whether you defect or not. In that case there is no particular reason for you to defect (except out of spite) and you are better off with the hopes that your opponent will keep his promise than with nothing.