Comments on: Golden Balls: Game Theory, the Prisoner’s Dilemma, and the cold rationality of human behavior! http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/ for students and teachers of AP and IB Economics Mon, 15 Mar 2010 00:02:05 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Armando.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9901 Armando.echl.f09 Mon, 25 Jan 2010 04:27:12 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9901 Catherine and Marcelo... Catherine Good choice... I would have done the same gone for everything... I probably wouldnt have mind if I knew Sarah's intentions. Marcelo I think in real life you would go for the money, I dont think you are ambitious. Catherine and Marcelo…
Catherine Good choice… I would have done the same gone for everything… I probably wouldnt have mind if I knew Sarah’s intentions. Marcelo I think in real life you would go for the money, I dont think you are ambitious.

]]> By: Armando.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9900 Armando.echl.f09 Mon, 25 Jan 2010 04:24:36 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9900 1- Well, Sarah ended up of gaining more money and levae with nothing or go with money in two ways, by either get 50,000 or by been more ambitious and try to get 50,000 more, meaning to try to leave with 100,000. Therefore, Sarah was smart and decided to create a close bond with Steve, who also wanted money, they were both planning to settle this money for their both benefits,but Sarah wanted it all, so finally Sarah ended up goin with all the money. 2- I think Steve was right about choosing the split, since he made an easy way to get money. He knew there was a high probablility that Sarah would choose the 50/50. I think if I was so close to getting the 100,000 I would have gone for it. However, Sarah was faster and more ambitious and took it all. 3- Oligopoly relates to Steve and Sarah as they can both agree to settle a split of the money for both of them or simply just go for all and take everything. On the other hand, OPEC usually fails to achieve the high price targets agreed by the heads of the group because if it sets the price and individual actors end up lowering prices. therefore , they never gain money. This is a strategy game of pair up and be fair are be ambitious and take it all and destroy the rest. 1- Well, Sarah ended up of gaining more money and levae with nothing or go with money in two ways, by either get 50,000 or by been more ambitious and try to get 50,000 more, meaning to try to leave with 100,000. Therefore, Sarah was smart and decided to create a close bond with Steve, who also wanted money, they were both planning to settle this money for their both benefits,but Sarah wanted it all, so finally Sarah ended up goin with all the money.

2- I think Steve was right about choosing the split, since he made an easy way to get money. He knew there was a high probablility that Sarah would choose the 50/50. I think if I was so close to getting the 100,000 I would have gone for it. However, Sarah was faster and more ambitious and took it all.

3- Oligopoly relates to Steve and Sarah as they can both agree to settle a split of the money for both of them or simply just go for all and take everything. On the other hand, OPEC usually fails to achieve the high price targets agreed by the heads of the group because if it sets the price and individual actors end up lowering prices. therefore , they never gain money. This is a strategy game of pair up and be fair are be ambitious and take it all and destroy the rest.

]]> By: Catherine.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9880 Catherine.echl.f09 Wed, 20 Jan 2010 18:01:39 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9880 Hey Daniel, I like your response to the second question, about what you would do in Steve’s situation. I think he gave in too easily, which made Sarah believe that he fully trusted her. If he had been more threatening, she would have probably chosen to split, in which case they would have both gotten money. He could still use the split, but I think that if he had threatened Sarah he would have had a greater chance to win the 100K himself. - Catherine Hey Daniel,
I like your response to the second question, about what you would do in Steve’s situation. I think he gave in too easily, which made Sarah believe that he fully trusted her. If he had been more threatening, she would have probably chosen to split, in which case they would have both gotten money. He could still use the split, but I think that if he had threatened Sarah he would have had a greater chance to win the 100K himself.

- Catherine

]]> By: Catherine.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9879 Catherine.echl.f09 Wed, 20 Jan 2010 17:57:55 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9879 1.) Sarah had two options: to walk away with 50K or try at get to 100K. She developed a bond with Steve that allowed him to trust her, and then took advantage of the situation. Steve wanted money and was willing to settle for 50K, but Sarah wanted to maximize her profits. In the end, she walked away with the money. 2.) Steve was not wrong to choose the split. He was trying to take the safe route and walk away with some kind o profit. He knew that there was a 50/50 chance that Sarah would choose to split, which is a very high probability. In that situation, I would probably choose to steal. I mean, when presented with the opportunity to get 100K, why not go for it? 3.) Oligopolies are a little like Steve And Sarah. They can agree to set a specific price and stick to it (the split), or one firm can secretly maneuver its prices and make a greater profit than the other firm (the steal). OPEC, for example, often fails to achieve the high price targets agreed upon in meetings of leaders because if it sets the price and individual actors end up lowering prices, OPEC does not make a gain. Essentially, there is a game of trust, and a firm can either uphold that trust or destroy it (and walk away with the money). - Catherine 1.) Sarah had two options: to walk away with 50K or try at get to 100K. She developed a bond with Steve that allowed him to trust her, and then took advantage of the situation. Steve wanted money and was willing to settle for 50K, but Sarah wanted to maximize her profits. In the end, she walked away with the money.
2.) Steve was not wrong to choose the split. He was trying to take the safe route and walk away with some kind o profit. He knew that there was a 50/50 chance that Sarah would choose to split, which is a very high probability. In that situation, I would probably choose to steal. I mean, when presented with the opportunity to get 100K, why not go for it?
3.) Oligopolies are a little like Steve And Sarah. They can agree to set a specific price and stick to it (the split), or one firm can secretly maneuver its prices and make a greater profit than the other firm (the steal). OPEC, for example, often fails to achieve the high price targets agreed upon in meetings of leaders because if it sets the price and individual actors end up lowering prices, OPEC does not make a gain. Essentially, there is a game of trust, and a firm can either uphold that trust or destroy it (and walk away with the money).

- Catherine

]]> By: Eline.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9878 Eline.echl.f09 Wed, 20 Jan 2010 02:13:11 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9878 Dennis, I have to agree with Vica here: while it is very courteous of you not to steal and to choose the option that will leave you with no guilt afterwards, you must also keep in mind that these two candidates are both in this show with as goal to win money, and not to be shown as "kind" people. Having participated in what must have been a nerve-cracking competition to win the money, and having been "stabbed in the back" previously, I think many people would react similar to Sarah. -Eline Dennis,

I have to agree with Vica here: while it is very courteous of you not to steal and to choose the option that will leave you with no guilt afterwards, you must also keep in mind that these two candidates are both in this show with as goal to win money, and not to be shown as “kind” people. Having participated in what must have been a nerve-cracking competition to win the money, and having been “stabbed in the back” previously, I think many people would react similar to Sarah.

-Eline

]]> By: Eline.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9877 Eline.echl.f09 Wed, 20 Jan 2010 02:01:44 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9877 1) Sarah had been "stabbed in the back last time" and therefore does not fully trust anyone to choose "split" anymore. As a result her choice to "steal" is a way of protecting herself against a repeat of that situation. Aware of the possibility that Steve will choose "steal" and walk away with everything, Sarah opts for "steal" to at least prevent him from doing that. She also realizes that if he chooses "split" she will earn more money by stealing than she would with splitting. 2) I do believe he should have made more of an effort to convince Sarah to choose "split," but I don't think his decision to split should be called wrong but should be encouraged. What Steve was really choosing from was from stealing and getting all the money or splitting and hopefully getting 50 and the respect of the public. By stealing he would not have been able to be proud of himself. I would probably try to convince the other player to split – unless the other player’s behavior is clearly showing they are going to steal, just like you could see it with Sarah. 3) If Steve and Sarah would have come to an agreement and split the money that would have been similar to how oligopolistic firms agree to set a certain price for their products, hence assuring normal but stable profits. What happened, though, was that Sarah decided to “Steal,” thus portraying how the moves an oligopolistic firm can make are unpredictable and not always according to the agreement, since firms prefer earning supernormal profits. Also OPEC leaders are usually not satisfied with earning normal profits as a result of a high set price. They will often lower prices to have increased demand so they can obtain higher profits. -Eline 1) Sarah had been “stabbed in the back last time” and therefore does not fully trust anyone to choose “split” anymore. As a result her choice to “steal” is a way of protecting herself against a repeat of that situation. Aware of the possibility that Steve will choose “steal” and walk away with everything, Sarah opts for “steal” to at least prevent him from doing that. She also realizes that if he chooses “split” she will earn more money by stealing than she would with splitting.

2) I do believe he should have made more of an effort to convince Sarah to choose “split,” but I don’t think his decision to split should be called wrong but should be encouraged. What Steve was really choosing from was from stealing and getting all the money or splitting and hopefully getting 50 and the respect of the public. By stealing he would not have been able to be proud of himself. I would probably try to convince the other player to split – unless the other player’s behavior is clearly showing they are going to steal, just like you could see it with Sarah.

3) If Steve and Sarah would have come to an agreement and split the money that would have been similar to how oligopolistic firms agree to set a certain price for their products, hence assuring normal but stable profits. What happened, though, was that Sarah decided to “Steal,” thus portraying how the moves an oligopolistic firm can make are unpredictable and not always according to the agreement, since firms prefer earning supernormal profits. Also OPEC leaders are usually not satisfied with earning normal profits as a result of a high set price. They will often lower prices to have increased demand so they can obtain higher profits.

-Eline

]]> By: victoria.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9868 victoria.echl.f09 Tue, 19 Jan 2010 22:56:56 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9868 Dennis, Wow very intresting point about people being greedy and yes it is so true people are so greedy in all kind of ways. I think it is very 'human' and 'nice' of you to say that you would pick 'split' and trust the other person but i think this is jsut too risky and the what you can win is just too much of worth. I would and already do think that it is cruel to do what Sarah did and when I looked at the youtube clip I was shocked and thinking how could she do such a thing but I would probably do the samething as what she did. this is because you should trust nobody and it might be fine to be stabbed in the back a few times but after a while you will realize how much you have lost and (hopefully) wont trust anybody like this any more. this is the same with firms in the begining they might be naive and trust everyone because all the other firms persuade them that they can trust eachother and then from the back everything is ruined for the 'nice' and naive firm. the money will be all lost and the only thing they gained is the lesson to never trust anyone, always be prepared for everything and start to ruin other firms so your firm can get bigger. (I hope this is understandable because sometimes i just write in no order and when i read my text it makes sence to me but not to anyone else.) Dennis,

Wow very intresting point about people being greedy and yes it is so true people are so greedy in all kind of ways. I think it is very ‘human’ and ‘nice’ of you to say that you would pick ’split’ and trust the other person but i think this is jsut too risky and the what you can win is just too much of worth. I would and already do think that it is cruel to do what Sarah did and when I looked at the youtube clip I was shocked and thinking how could she do such a thing but I would probably do the samething as what she did. this is because you should trust nobody and it might be fine to be stabbed in the back a few times but after a while you will realize how much you have lost and (hopefully) wont trust anybody like this any more. this is the same with firms in the begining they might be naive and trust everyone because all the other firms persuade them that they can trust eachother and then from the back everything is ruined for the ‘nice’ and naive firm. the money will be all lost and the only thing they gained is the lesson to never trust anyone, always be prepared for everything and start to ruin other firms so your firm can get bigger.

(I hope this is understandable because sometimes i just write in no order and when i read my text it makes sence to me but not to anyone else.)

]]> By: victoria.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9867 victoria.echl.f09 Tue, 19 Jan 2010 22:44:29 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9867 1. Sarah choose to steal rather than to collaborate with Steve this I think it is normal as if Sarah chose to collaborate with Steve he could have chosen to pick ‘steal and she would have been left with nothing and if he would have picked ‘split’ they would both get 50,000. But as Sarah chose to steal the two options would have been 1. Steve would have picked ‘steal’ as well and both would get nothing or 2. He would have picked ‘split’ and Sarah would have won all the money and Steve nothing. So this means that either way what Sarah picks she could loose everything or share the money or get all the money. So if anyway there is a risk of loosing everything why not risk everything on winning all the money. 2. Steve was just very Naïve as he trusted Sarah and let him self be persuaded by her that he should pick ‘split’ and so he did. I wouldn’t have done that. I would have taken ‘steal’ as this is the option you loose the least. As if my opponent would have been honest with me and picked ‘split’ I would win everything, if she had lied to me we would both loose everything. But if I would have picked split and she would be honest to me we would both win 50% but if she had lied I would loose everything. And so by picking ‘steal’ and win I win more than if I pick ‘split’ and in both ways I can also loose everything. (I have just repeated my self 1000 times I think but this game is just so clever and so exiting I cant really express in writing what I could be saying about what happened between Sarah and Steve in the game) 3. The example of Sarah and Steve are like in a oligopolistic market as one depended on the other and Sarah wanted to have the most profit of it so she ad to betray Steve. Firms also have to do such things if they want to have a maximum profit. On the other side Steve should have not been so naïve he should have done some tactical thinking and should have tried to predict what Sarah might do in such a situation and place himself in Sarah’s situation. This is the same for firms they will have to be ‘cruel’ by choosing ways where they can win all and not be ‘nice’ and trust the others and risk to loose all, and be prepared for every move the competitors do. 1. Sarah choose to steal rather than to collaborate with Steve this I think it is normal as if Sarah chose to collaborate with Steve he could have chosen to pick ‘steal and she would have been left with nothing and if he would have picked ‘split’ they would both get 50,000. But as Sarah chose to steal the two options would have been 1. Steve would have picked ‘steal’ as well and both would get nothing or 2. He would have picked ‘split’ and Sarah would have won all the money and Steve nothing. So this means that either way what Sarah picks she could loose everything or share the money or get all the money. So if anyway there is a risk of loosing everything why not risk everything on winning all the money.

2. Steve was just very Naïve as he trusted Sarah and let him self be persuaded by her that he should pick ‘split’ and so he did. I wouldn’t have done that. I would have taken ‘steal’ as this is the option you loose the least. As if my opponent would have been honest with me and picked ‘split’ I would win everything, if she had lied to me we would both loose everything. But if I would have picked split and she would be honest to me we would both win 50% but if she had lied I would loose everything. And so by picking ‘steal’ and win I win more than if I pick ‘split’ and in both ways I can also loose everything.

(I have just repeated my self 1000 times I think but this game is just so clever and so exiting I cant really express in writing what I could be saying about what happened between Sarah and Steve in the game)

3. The example of Sarah and Steve are like in a oligopolistic market as one depended on the other and Sarah wanted to have the most profit of it so she ad to betray Steve. Firms also have to do such things if they want to have a maximum profit. On the other side Steve should have not been so naïve he should have done some tactical thinking and should have tried to predict what Sarah might do in such a situation and place himself in Sarah’s situation. This is the same for firms they will have to be ‘cruel’ by choosing ways where they can win all and not be ‘nice’ and trust the others and risk to loose all, and be prepared for every move the competitors do.

]]> By: Dennis.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9866 Dennis.echl.f09 Tue, 19 Jan 2010 21:47:53 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9866 Mattea, I find it interesting that you and so many people say that if you were in that position, you would choose steal. I'm just wondering why, because I do not understand how stealing 50,000 pounds that does not really rightfully belong to either candidate can bring anyone satisfaction. Perhaps, it is exactly this mentality of cold self-promoting action that is why we humans have so many problems in the nature of our lives. Therein, I see the only appropriate choice to be split, even if other candidate chooses steal, at least you walk away with a sense of self, whereas the opponent will probably feel enormous guilt whenever spending that money. Anyhow, I don't mean to offend you, I'm just offering a point of view. -Dennis- Mattea,

I find it interesting that you and so many people say that if you were in that position, you would choose steal. I’m just wondering why, because I do not understand how stealing 50,000 pounds that does not really rightfully belong to either candidate can bring anyone satisfaction. Perhaps, it is exactly this mentality of cold self-promoting action that is why we humans have so many problems in the nature of our lives. Therein, I see the only appropriate choice to be split, even if other candidate chooses steal, at least you walk away with a sense of self, whereas the opponent will probably feel enormous guilt whenever spending that money. Anyhow, I don’t mean to offend you, I’m just offering a point of view.

-Dennis-

]]> By: Dennis.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9865 Dennis.echl.f09 Tue, 19 Jan 2010 21:34:46 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9865 1. Sarah chose to steal rather than to collaborate with Steve for a possible multitude of reasons. One is that, as Elijah mentions, the pure logic of averages dictates that stealing is a logically better option. Also, she might have chosen steal simply because she was afraid to be stabbed in the back again (as mentioned at the end of the clip). The final reason that she might have chosen steal is simple greed, human nature makes us wish to benefit ourselves more than anyone else, especially some stranger we will never see again. 2. Steve was not totally wrong to choose split, although he was wrong logically. As explained above, the logical choice is steal, however, he let his simple emotions or rather his character get the best of him. In this situation I would choose split. This is because I personally feel no need to ruin someone's opportunities especially if I will be getting money for free, but if the other person chooses steal, I know that I have the ability to go on with my life, unlike many people out there. 3. The decisions made by Steve and Sarah relate to decisions made by oligopolistic firms in that they also have to sort of guess what intentions the competing firms have in mind. And with these guesses or predictions they choose how to set their prices. Collusive agreements in between oligopolies often fall apart because a firm cannot trust another firm to stick to the agreement when each firm is actually looking out for its own best interest, thus the collusive agreements often collapse. Cartels like OPEC cannot agree on a single high price because each individual firm is afraid that the others will not come through on their promises. -Dennis- 1. Sarah chose to steal rather than to collaborate with Steve for a possible multitude of reasons. One is that, as Elijah mentions, the pure logic of averages dictates that stealing is a logically better option. Also, she might have chosen steal simply because she was afraid to be stabbed in the back again (as mentioned at the end of the clip). The final reason that she might have chosen steal is simple greed, human nature makes us wish to benefit ourselves more than anyone else, especially some stranger we will never see again.
2. Steve was not totally wrong to choose split, although he was wrong logically. As explained above, the logical choice is steal, however, he let his simple emotions or rather his character get the best of him. In this situation I would choose split. This is because I personally feel no need to ruin someone’s opportunities especially if I will be getting money for free, but if the other person chooses steal, I know that I have the ability to go on with my life, unlike many people out there.
3. The decisions made by Steve and Sarah relate to decisions made by oligopolistic firms in that they also have to sort of guess what intentions the competing firms have in mind. And with these guesses or predictions they choose how to set their prices. Collusive agreements in between oligopolies often fall apart because a firm cannot trust another firm to stick to the agreement when each firm is actually looking out for its own best interest, thus the collusive agreements often collapse. Cartels like OPEC cannot agree on a single high price because each individual firm is afraid that the others will not come through on their promises.

-Dennis-

]]> By: Trevor Tezel http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9864 Trevor Tezel Tue, 19 Jan 2010 20:20:15 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9864 Good catch, Chamonix! I didn’t quite pick up on the fact that Sarah might have been “stabbed in the back last time.” I’m sure that has a great impact on the decisions both of Sarah and Steve make in this game. I have to say, though, that your analysis of the actions that both individuals should have taken may ignore the basic fact that you never truly know the intentions of your competitors and can only somewhat understand their inner thinking. Steve can work as hard as he can to convince Sarah to split but, in the end, he places a certain amount of risk in whatever decision he makes. And I believe in this game, the players make their decisions unaware of the decisions being made by the other player. Good catch, Chamonix! I didn’t quite pick up on the fact that Sarah might have been “stabbed in the back last time.” I’m sure that has a great impact on the decisions both of Sarah and Steve make in this game.
I have to say, though, that your analysis of the actions that both individuals should have taken may ignore the basic fact that you never truly know the intentions of your competitors and can only somewhat understand their inner thinking. Steve can work as hard as he can to convince Sarah to split but, in the end, he places a certain amount of risk in whatever decision he makes. And I believe in this game, the players make their decisions unaware of the decisions being made by the other player.

]]> By: Jacob.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9863 Jacob.echl.f09 Tue, 19 Jan 2010 20:18:15 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9863 Issa, I really like what you said about how Sarah is more willing to trust logic rather than another person. That is a big reason why collusion fails and I'm impressed that you were able to tie that in here. Issa, I really like what you said about how Sarah is more willing to trust logic rather than another person. That is a big reason why collusion fails and I’m impressed that you were able to tie that in here.

]]> By: Mattea.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9862 Mattea.echl.f09 Tue, 19 Jan 2010 20:15:33 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9862 Trevor, Your point about Steve not operating on a "live and let die" philosophy is interesting. Most economists assume that humans are purely self-centered, and would act as such in this situation. According to the typical economic philosophy, Steve's choice would have been motivated by self-centerdness rather than altruism. They would argue that he was simply trying to minimize risk and made a false assumption that Sarah would do the same. Trevor,
Your point about Steve not operating on a “live and let die” philosophy is interesting. Most economists assume that humans are purely self-centered, and would act as such in this situation. According to the typical economic philosophy, Steve’s choice would have been motivated by self-centerdness rather than altruism. They would argue that he was simply trying to minimize risk and made a false assumption that Sarah would do the same.

]]> By: Jacob.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9861 Jacob.echl.f09 Tue, 19 Jan 2010 20:14:34 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9861 1. Because she is inconsiderate of others and realizes that business is business and she is just trying to get as much output as she can and even if Steve also steals, she knows she took him down. 2. Steve was not totally wrong because he was being tactful for his opponent and did not want to ruin her. 3. In oligolopolistic markets a decision made by one firm directly affects the others and their decisions have to be based on what they think the other firms will do. Collusion usually fails because a firm decides one thing will help their own firm and the others less, calling the collusion to fall apart. Also when OPEC sets high price targets, all the other firms in the world will try to find ways to get it cheaper because they worry other firms will be undercutting. 1. Because she is inconsiderate of others and realizes that business is business and she is just trying to get as much output as she can and even if Steve also steals, she knows she took him down.
2. Steve was not totally wrong because he was being tactful for his opponent and did not want to ruin her.
3. In oligolopolistic markets a decision made by one firm directly affects the others and their decisions have to be based on what they think the other firms will do. Collusion usually fails because a firm decides one thing will help their own firm and the others less, calling the collusion to fall apart. Also when OPEC sets high price targets, all the other firms in the world will try to find ways to get it cheaper because they worry other firms will be undercutting.

]]> By: Mattea.echl.f09 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/comment-page-1/#comment-9860 Mattea.echl.f09 Tue, 19 Jan 2010 20:12:23 +0000 http://welkerswikinomics.com/blog/2009/04/10/golden-balls-game-theory-the-prisoners-dilemma-and-the-cold-rationality-of-human-behavior/#comment-9860 1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000? By choosing to steal, Sarah is not really risking anything. If Steve decides to steal as well, then she will end up with nothing--the same as if she had chosen to split while he stole. However, if she steals while he splits, she stands to win much more than if they both split. 2. Was Steve totally wrong to choose split? What would you have done in his situation? By choosing to split, Steve assumed that Sarah would do the same. This was a faulty assumption, as she stood to win more by stealing rather than splitting. In that situation, I would have chosen to steal because I would have the opportunity to win a lot more money. 3. How do the choices faced by Steve and Sarah relate to the choices faced by firms in oligopolitic markets? Now that you’ve seen this video, can you explain why collusive agreements between oligopolists often fall apart? Why do cartels such as OPEC often fail to achieve the high price targets agreed upon in meetings of their leaders? In an oligopoly, firms must make decisions based on what they think others will do. The same is true in this situation, where Sarah and Steve must consider what the other will choose. Cartels might fail to reach price targets because the firms may not trust each other entirely, and try to take advantage of each other and go back on their agreement. 1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?
By choosing to steal, Sarah is not really risking anything. If Steve decides to steal as well, then she will end up with nothing–the same as if she had chosen to split while he stole. However, if she steals while he splits, she stands to win much more than if they both split.
2. Was Steve totally wrong to choose split? What would you have done in his situation?
By choosing to split, Steve assumed that Sarah would do the same. This was a faulty assumption, as she stood to win more by stealing rather than splitting. In that situation, I would have chosen to steal because I would have the opportunity to win a lot more money.
3. How do the choices faced by Steve and Sarah relate to the choices faced by firms in oligopolitic markets? Now that you’ve seen this video, can you explain why collusive agreements between oligopolists often fall apart? Why do cartels such as OPEC often fail to achieve the high price targets agreed upon in meetings of their leaders?
In an oligopoly, firms must make decisions based on what they think others will do. The same is true in this situation, where Sarah and Steve must consider what the other will choose. Cartels might fail to reach price targets because the firms may not trust each other entirely, and try to take advantage of each other and go back on their agreement.

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