Apr 20 2012

UPDATE: Golden Balls, Game Theory, the Prisoner’s Dilemma, and the cold rationality of human behavior!

In my original “Golden Balls” blog post (see below), written almost three years ago after I saw a clip of the finale in an episode of the British game show, Golden Balls, I analyzed the actions of Sarah and Steve, who  had to decide whether they would split or steal a jackpot of 100,000 British pounds. The contestants had one minute to try to convince one another that they would split the money; but when it came down to it Sarah stole and Steve split, meaning Sarah got to keep the whole jackpot and Steve went home with nothing.

In that original post, I proposed that Steve’s best chances for going home with any money would have been “for him to use the one minute of discussion time to convince Sarah that he would choose SPLIT, yet be willing to go home with something LESS THAN $50,000 and accept that Sarah was going to choose STEAL. He could have threatened to chose steal if she did not agree to share her winnings with him to some extent.”

In a recent episode of the same game show, a contestant followed a similar strategy to that I suggested Steve should have taken. Watch the clip below, from a February 2012 episode of Golden Balls.

In this episode, Nick immediately takes control of the negotiations by insisting that he is going to steal, which is a very unorthodox approach to this game, in which the traditional strategy is to try and convince your opponent that you are going to split. By establishing a credible threat to steal, Nick puts all the pressure on Ibraham to decide only one of two things:

  1. Does Ibraham trust that Nick will split the money with him after he has stolen the full jackpot, and
  2. Would Ibraham rather both of them go home without any money at all than Nick win the jackpot and possibly not split it with him later on?
Nick’s strategy is brilliant. By the end of the negotiation, Nick has convinced Ibraham 100% that he is going to steal the money. Ibraham may only have had a confidence level of 50% that Nick was honest about splitting the money with him after the show, but with a 50% confidence level, Ibrahim’s possible payoffs are:
  • Choose steal and go home with nothing.
  • Choose split and have a 50/50 chance of going home with half the jackpot (based on his level of confidence in Nick’s promise to split the money after the show).
In other words, with a jackpot of 14,000 pounds, the payoffs for Ibrahim became:
  • If he splits: 0 pounds or 0.5(14,000) = 7,000 pounds
  • If he steals: 0 pounds or 0 pounds (assuming his confidence level in Nick’s intention to steal is 100%).
Clearly Ibraham now has a dominant strategy: to split. In the typical version of this game, a player’s dominant strategy is always to steal (as explained below), since the possible payoffs are:
  • If you split: 0 pounds or half the jackpot
  • If you steal: 0 pounds or the whole jackpot.
But because Nick has convinced his opponent that he will steal, and then split the winnings, Ibraham’s dominant strategy shifted to split, since the possible payoffs have changed. Ultimately, Ibraham does what is most rational given his confidence in Nick’s threat to steal, and that is to split. Ibraham then chooses split (as he should), but then to everyone’s surprise, Nick chooses split, not steal as he had threatened to do throughout the negotiation. This a surprising twist, since from Nick’s perspective stealing is clearly now a dominant strategy! Nick had convinved Ibraham to split, which means Nick faced a greater payoff by stealing. But by splitting, Nick shows that he had intended to split all along, but first needed to convince Ibraham otherwise to establish splitting as Ibraham’s dominant strategy.
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What a thrilling game! I won’t even bother getting into how this relates to economics today, I’m still shaking with excitement over the outcome!
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Original Golden Balls post:
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Teaching the Prisoners’ Dilemma Will Never Be the Same Again « Cheap Talk

Rarely does such a perfect illustration of the Prisoner’s Dilemma come along for Econ teachers to use in their classroom:

The payoffs are clear:

Each player has a weakly dominant strategy, which is to choose to steal. By choosing to steal, the player has a chance at maximizing his own payoff, but will do no worse than he would if his opponent also chooses to steal and at least will have the satisfaction of thwarting his opponent’s attempt to steal the money.

There are three Nash equilibria in the game, which are outcomes at which a player can not do better on his or her own by changing his or her strategy. The outcome Steve was hoping for by chosing “split” (50/50) was not a Nash equilibrium because Sarah knows she can do better if she chooses steal when Steve chooses split. Steve doomed himself by choosing split because he should know that Sarah’s dominant strategy is to choose steal. However, Sarah would also have doomed herself by choosing split because she should assume that Steve would also chose steal since steal is a dominant strategy for him too.

John Nash, who pioneered the field of Game Theory, assumed that humans were coldly rational, self-interested, deceptive creatures that would not hesitate to stab one another in the back to get what was best for themselves. His theory of human behavior is only partially proven correct in this game, in which Steve is shown to be the sucker and Sarah the coldly rational self-interested player. The best chance for Steve to go home with any money would have been for him to use the one minute of discussion time to convince Sarah that he would choose SPLIT, yet be willing to go home with something LESS THAN $50,000 and accept that Sarah was going to choose STEAL. He could have threatened to chose steal if she did not agree to share her winnings with him to some extent. Then again, any promise Sarah makes she could later break, thus further empowering the players to choose steal.

Discussion questions:

  1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?
  2. Was Steve totally wrong to choose split? What would you have done in his situation?
  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?

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author


110 responses so far

110 Responses to “UPDATE: Golden Balls, Game Theory, the Prisoner’s Dilemma, and the cold rationality of human behavior!”

  1. Elijah.echl.f09on 14 Jan 2010 at 1:13 am

    1. I would argue that Sarah chose steal because because the way she saw it, if she choose split, her best outcome would have been 50K profit with her other (and worst) being none. However if she chooses steal her best outcome is now 100K and her other (and worst) is still 0. Therefore by pure logic of averages, assuming Steve's choice is random she should choose to steal.

    2. Steve was not totally wrong to choose split. The fact is in the above paragraph in which I discussed the outcomes, the same are true of Steve. If Steve follows this through, he should also choose steal. However if both player use this logic and are aware of it, neither will get anything and thus you end up in a paradox in which Steve must convince Sarah to split, and Sarah must convince Steve to split but then both players see the ability to steal again when the other thinks that they are safe in a split. It's something of an endless paradox. In short though splitting is not necessary a bad decision.

    3. The choices faced by Steve and Sarah more or less reflect Oligopolic competition in cartel nature. They can both agree to the price set and make a good profit, or one could under cut the other and take in more money. However if both undercut, both lose profit. Ultimately the greedy nature of humanity means that it is hard to resist the temptation to undercut the price leader.

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  2. Meiling.echl.f09on 16 Jan 2010 at 5:08 pm

    1. I think that Sarah chose SPLIT either because she did not think she could rely on Simon to SPLIT with her, or because believed Simon's sincerity and chose to fool him to gain maximum benefit for herself. If she chose SPLIT, she would be putting herself in danger of loosing 100,000, but by choosing STEAL she eliminated the chance of Simon winning anything: either she would take it all or they would both go home with nothing, thus always reaping more or equal benefit to her opponent. The deciding factor in this game is trust: Simon placing his in Sarah to split 50/50, and Sarah, following the basic human instinct of self-preservation, betraying Simon to win the 100,000.

    2. I think that Simon's intentions were good: from his point of view them both choosing SPLIT would be advantageous to both of them, with each walking away with 50,000, as opposed to one with 100,000 and one with nothing. However he doesn't take into account the principle's behind game theory: ultimately humans will act to maximize their benefits, which Sarah did, taking advantage of his SPLIT to STEAL the 100,000. If he had understood this at the time, perhaps he would have appealed to his innate selfishness, and made a different decision. Basically, in order to win any money in the game, each player has to convince the other player that they are going to SPLIT, then either STEAL the money or really SPLIT it. Them actually winning any money either involves complete trust – which is quite difficult between strangers – or second-guessing one another.

    3. This kind of game theory that is present in the choices of Simon and Sarah are similar to oligopolistic competition in a cartel. Cartels can either 'SPLIT' – i.e. choose a set price and abide by it and mutually benefit, or 'STEAL' whereby one firm undercuts the others and takes a profit, or both firms undercut and both loose out. I think that with respect to big countries, it is almost impossible to have complete confidence in each other's integrity, as there is always the overwhelming temptation to act selfishly and gain maximum benefit for oneself by abusing the trust of another party. It is easy to see why OPEC countries often fail to uphold their agreements: they can both mutually benefit by choosing to 'SPLIT', but relations between nations are never transparent and there will always be other external factors that motivate one to betray another's confidence.

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  3. Meiling.echl.f09on 16 Jan 2010 at 5:12 pm

    @Elijah

    I like your comparison of the decisions that Simon and Sarah can make to a paradox. I think external factors play an extremely important part in the outcome; from Simon's PoV and what should have been Sarah's too at the time, the best option would have been to both really and honestly choose to SPLIT and both gain something. However, Simon failed to take into account that Sarah had been cheated before (she hints at it at the end of the video), and this would affect her decision; if she did not fully trust Simon, she would have always chosen to STEAL.

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  4. Ralph.echl.f09on 17 Jan 2010 at 11:36 pm

    1. In my opinion it was more benifical for Sarah to steal as it would walk away with 100,000 pounds or 50,000 pounds more. Eventhough there was a 50% chance that Steve would choose steal and that none of them would benefit. As Elijah said we must assume that Steve’s choice is random, and that Sarah will choose steal. We can assume that she will win 0 or the full amount of 100,000. However it could also be done the other way round.

    2.Was Steve totally wrong to choose split? What would you have done in his situation?
    Steve was folllowing his human instinct and believed that it was right so share, however he was conned by Sarah. John Nash’s cold rational behaviour, didn’t play out in this case, as Steve was affraid of what the public would think of him. However Sarah did match John Nash’s cold behaviour. The safer option for the two would be to split, and that is what Steve chose to do. However Sarah decided to be cold and chose steal.

    3. If we start to compare their choices to oligopoly. We could state that this is an competitive olipoly however it could turn collusive, specifically formal collusive. Steve has negotiated with Sarah an agreed output for Sarah but not for himself.

    OPEC, tends to fail, as leaders attempt to sell their oil at a cheaper price to attract more customers, thus there isn’t real control. They all went to make the best profits, OPEC is there to make sure it doesnt go out of control, and to set some standards. However it does have a major effect on the market.

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  5. Masaya.echl.f09on 17 Jan 2010 at 6:28 pm

    1. Sarah chose steal rather than collaborate with Steve and share the $100,000 because she is a “coldly rational, self-interested, deceptive creatures that would not hesitate to stab one another in the back to get what was best for themselves.” It was only possible for her to choose steal if she absolutely knew Steve was going to choose split because should Steve chosen steal, they both have not brought back the money home.

    2. Steve’s decision is not wrong at all. In fact, his decision seems more human-like in terms of his kindness and will to share the money. On the contrary, Sarah is a self-interested creature who is determined to deceive anyone when something big is up for grabs. I would have threatened to use steal at the one minute discussion before the decision so Sarah would hesitate to use the steal, and choose split to share the money evenly. It is better for both Sarah and I to bring back something home rather than nothing.

    3. The choices faced by Steven Sarah relate to the choices faced by firms in oligopolistic market because one firm’s decision affects the response of its rival competitors. Collusive agreements between firms often fall apart because individual firms attempt to seek profit at their own interest, not to share happiness with others. Cartel such as OPEC often fails to achieve the high price targets agreed upon meetings of their leaders because individual attempt to attract more consumers by lowering their prices which consequently lowers the competitor’s price, bringing down the price of the entire market.

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  6. Masaya.echl.f09on 18 Jan 2010 at 8:04 pm

    Ralph>>

    Though OPEC sets standards for its oil pricing, but individual firms attempt to increase its sale by lowering the price, which in turn, affects the other firms because they must also decrease its price to fight the competition with the former. I think this is an excellent example of how John Nash puts it "humans were coldly rational, self-interested, deceptive creatures that would not hesitate to stab one another in the back to get what was best for themselves."

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  7. daniel.echl.f09on 18 Jan 2010 at 10:33 pm

    1.What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    there were many reasons as to why sarah has chosen steal here. Obviously we can see the conviction and hard felt commitment by Steve to split the prize money and so by stealing she would be able to collect all the money. Another key factor highlighted at the end of the piece is how she has been "stab in the back before" this therefore helps her come to the conclusion to steal the money rather than split through previous experience. By stealing she has the opportunity to collect all of the money but possibly find herself with no money at all and we see that she was willing to go home with no money what so ever because she chose the steal ball. Obviously here by stealing she will take the full amount or neither will which makes it a level playing field but if all had this strategy the game would never be won. She also has to consider the 50% chance that Steve will pick steal and so stealing the money means she has all or neither have anything.

    2.Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve was relying on the morals of the girl sat opposite and he thought that by sharing they would receive equal amounts of the money. Steve is more humane and obviously uses the utilitarian view as he both tries to benefit both and overcome greed but the temptation is to much for sahara. If i was Steve i would have threatened to use the steal ball so she has to face the fact of having no money or half and would make her consider the benefits of going on halves but this would rely on the fact that he would use split.

    3.How do the choices faced by Steve and Sarah relate to the choices faced by firms in oligopolistic 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?

    The decisions faced by Steve and sarah can be mirrored in an oligopolistic market as they must preempt what the competitors will do and try match it or beat it in order to make the most money possible for them individually rather than collectively referring to the cold behaviour of humans. Collusive agreements fall apart because of self interest of the businesses as they try to get a majority in the market that is larger than there competitors. OPEC fail because they want to set the prices across all oil companies but when this standard is set there is an opportunity to under cut the prices to increase turnover of the business and so we see price wars happen.

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  8. daniel.echl.f09on 18 Jan 2010 at 10:38 pm

    Meiling

    very good response to the questions. Also on the first question you show the rational reasoning of the women but you also need to consider the fact that before she has been "stabbed in the back" making her decision less rational more irrational as she seeks revenge. The explanation of OPEC is also very clear and is very true that different nations will have contradicting views.

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  9. sara.echl.f09on 19 Jan 2010 at 12:56 am

    1. Sarah probably chose to steal because she didn’t think she could rely on Steve to choose split so she followed her natural instinct of self-preservation and chose steal to make sure that she would walk away with some money even if Steve didn’t. Her need or desire for the $100,000 was greater than her trust in Steve, so she decided to go with her instinct and make sure that she didn’t come out of the competition with nothing.

    2. Steve wasn’t wrong, he was just trying to believe the best in Sarah by choosing split and deciding that he could convince her to split the money during the 1 minute discussion time; he shows more trust than Sarah in this case. I probably would have done what Sarah did, but maybe come to an agreement during the discussion time so that we could both come out with some money.

    3. This situation is similar to an oligopoly in cartel nature because the companies can either reach an agreement and keep their word and split the profit, or they can undercut the other company and leave with all of the profits. The only problem is that if both companies decide to undercut, neither of them will gain profits, so big profits depend on trust between the two companies. Arguments between oligopolists often fall apart because the companies don’t really trust each other so they always try to get the bigger half of the profits and sometimes end up ruining the profits for the other companies.

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  10. sara.echl.f09on 19 Jan 2010 at 1:12 am

    Masaya,

    I like your point about companies lowering their prices to try and attract consumers and that this lowers the price of the market. Do you think this also lowers profits for the other ocmpanies in the same market?

    sara

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  11. Marcelo.echl.f09on 19 Jan 2010 at 8:57 am

    Well, isn't it obvious? John Nash was genius, and was definitely correct in his interpretation of human behavior: humans are selfish bastards who only seek personal gain. However, it is not just that they are selfish, but that this selfishness has led them to mistrusting everybody: for example, I believe Sarah would have been extremely happy to go home with 50 000: but she thought Steve would steal (mistrust) so she decided to steal as well to make sure Steve would not win. Steve, in the other hand, is only a victim of human stereotypes and prejudices, and even if he might have been a trustworthy person once, he will never be again, taking Sarah's place next time. Indeed, as Sarah said "I couldnt be stabbed in the back again:" she was stabbed in the back once (like Steve), and thus became mistrusting (this reminds me of the domino theory). Nevertheless, it might have happened that Sarah was indeed aware of the fact that Steve was not lying, but just wanted to get everything for herself, still proving John Nash's theory of deceptive, self-interested human behavior.

    Actually Steve represents the core human being who is new to life and does not realise the fierce nature of people: of course he was totally wrong by choosing to split; by choosing split, he had 1 chance out of 2 to get 50 000, while by choosing steal, he had 1 chance out of 2 to get 100 000. Trust and faith are things which do not apply to humans and money: it is only probability which needs to be accounted for when dealing which such matters. Me? For sure I would have chosen steal: however, I would have told the other person I would in fact steal. I would tell her that she must choose to split, and that after the game I would give her half of what I gained; I would tell her to trust me, but even if she did not, I would tell her that anyways, by splitting, she had at least one chance out of two to get 50 000; if she stole, she would not get anything at all for sure. All a matter of probability and trust. And of course, if she chose split, I would then give her half of what I won. If she chose steal, I would tell her we had both lost 50 000 because of a pointless, vindictive and rather dumb human mistrust.

    Well, oligopolistic markets indeed try at times to reach similar agreements, in which they share profits equally, by dividing them. However, they are still risking to lose everything if the other does not do what was agreed. So, indeed, that is why agreements between oligopolists often fall apart: they do not trust each other, and constantly stab each other in the back. The same happens with OPEC: the lack of trust and abundance of self-interest leads to constant failure.

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  12. Marcelo.echl.f09on 19 Jan 2010 at 9:09 am

    Ralph,

    John Nash's theory played out perfectly in this case: Sarah was coldblooded, selfish and deceptive. And of course, to be able to create such terms you need someone who represents the opposite; in this case the sincere and trusting human being, otherwise such adjectives and theory could not possibly exist.

    Furthermore, you speak about 'what the public would think;' Imma tell you one thing: when it comes to money, and in this case thousands of it, you dont care at all about what the public might think. Steve chose to split because he trusted Sarah would do the same (it is this wrong belief men have that women are weak and vulnerable.)

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  13. Marcelo.echl.f09on 19 Jan 2010 at 9:14 am

    Daniel and Masaya,

    Threatening the other player with stealing for no other reason than intimidation would only provoke the typical self-preservation human response which is stealing as well from you, and would make you walk out with your empty hands.

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  14. Issa.echl.f09on 19 Jan 2010 at 9:49 am

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah chose to STEAL rather than collaborate with Steve and share the $100,000 because she decided to depend logic rather than another human being. If Sarah chooses SPLIT she has a 50% of not going home with anything. If she chooses STEAL she has the same probability of loss, but the amount of money she'd gain by STEALING is twice as much as she'd gain if she SPLIT the money. Also if Sarah is convinced of Steve's honesty then by stealing she is reaping the greatest benefit for herself. If she isn't convinced then she is preventing him from taking advantage of her. Her choice to STEAL is the most logical.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve is not totally wrong to chose split because he based his decision on common decency rather than logic. This may not be the smartest choice, but in the context of human society such a moral act could hardly be doomed wrong. Also, if Sarah and Steve decided before hand that one of them would choose split, then they are insuring that someone gets the money instead of leaving it to chance where a possibility is that both could walk out with no money. The money could then still be split after the show. Either way, the only way for anyone to benefit is for at least one person to split.

    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?

    Collusive agreements between oligopolists fall apart, because one oligopolist always serves to benefit more if it undercuts the prices of the other oligopolists with which it is colluding. This is why cartels like OPEC often fail to achieve the high targets agreed upon in the meetings of their leaders. There is always the possibility that another oligopolist will undercut the agreed upon price and take profits away from the rest. This leads the other oligopolists to use logic and realize that the best way for them to ensure their own security is undercut as well, or undercut first.

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  15. Issa.echl.f09on 19 Jan 2010 at 9:54 am

    @Daniel

    I'm not sure what benefit Steve would have achieved by threatening to use the steal ball. This would only serve to make Sarah insecure an probably give her an even greater incentive to use her own steal ball. Plus, Sarah gave no indication that she was going to use the steal ball. There was no reason for Steve to threaten her with this. A threat from Steve would probably end up with to steals and no money for anyone.

    -Issa

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  16. Chamonix.echl.f09on 19 Jan 2010 at 3:09 pm

    • Sarah chose to Steal because she knew that it was the best way to get what she wanted. Sarah wanted to win 100,000 pounds and did not want to Split, so she chose to Steal in order to maximize her profits. Also, I believe that she said something about "being stabbed in the back last time," which is an example of competitors learning from previous mistakes.

    • Morally, Steve was totally right to Split. Splitting is the kindest and most fair thing to do. However, Economics and Ethics are not exactly the same! If Steve had chosen to Steal, he still would have won no money. I think that he should have worked harder during the discussion to make Sarah choose to Split, and then either Split or Steal. This would have given him a greater chance of winning either half or all of the money. If I was Steve, I would have told Sarah that she had to share or I would Steal. If I convinced her that if she chose Steal I would also, and therefore take all of her money, she might have agreed to Split, and I could have won half the money, which is better than none.

    • The choices faced by Steve and Sarah are like those in Oligopolistic markets because they demand trust, although only betrayal can bring maximized profits. When oligopolistic markets collude, they assume that their competitors will keep their promises. When collusive agreements fall apart, one firm wins while the other loses. The winner loses the trust of the loser and others. Cartels sometimes fail to reach high price tags because they are worried that the other parties will not maintain their promises.

    Chamonix

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  17. Chamonix.echl.f09on 19 Jan 2010 at 3:13 pm

    Issa,

    I liked how you said that the only way for anyone to benefit is for one person to Split. I think that this has a pretty clear message. If people are not willing to exercise trust and take personal risks, then no one can make any progress. In economics, people must take risks to invest, buy, and sell so that a market can even exist. You noted that it is morally the best thing to Split. I agree. This can also be seen in the metaphor for Economics as a whole. By investing or selling, people and firms are doing the right thing by helping those around them to progress Economically. It shows that you have to be selfless to succeed.

    Thanks, this was a really interesting post.

    Chamonix

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  18. Ralph.echl.f09on 19 Jan 2010 at 5:05 pm

    @Marcello

    I agree with your comment of "It is this wrong belief men have that women are weak and vulnerable." You are right about the public view, however It could be discussed.

    @Issa & Chamonix, Just like Chamonix I really enjoy Issa view view on question two, as it does indeed show the public deceny that Steve showed, however Just wondering what you guys would do if you were in Steve's position, knowing the odds.

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  19. Laura Yilmazon 19 Jan 2010 at 11:12 pm

    1.What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    there were many reasons as to why sarah has chosen steal here. Obviously we can see the conviction and hard felt commitment by Steve to split the prize money and so by stealing she would be able to collect all the money. Another key factor highlighted at the end of the piece is how she has been “stab in the back before” this therefore helps her come to the conclusion to steal the money rather than split through previous experience. By stealing she has the opportunity to collect all of the money but possibly find herself with no money at all and we see that she was willing to go home with no money what so ever because she chose the steal ball. Obviously here by stealing she will take the full amount or neither will which makes it a level playing field but if all had this strategy the game would never be won. She also has to consider the 50% chance that Steve will pick steal and so stealing the money means she has all or neither have anything.

    2. I think that Simon’s intentions were good: from his point of view them both choosing SPLIT would be advantageous to both of them, with each walking away with 50,000, as opposed to one with 100,000 and one with nothing. However he doesn’t take into account the principle’s behind game theory: ultimately humans will act to maximize their benefits, which Sarah did, taking advantage of his SPLIT to STEAL the 100,000. If he had understood this at the time, perhaps he would have appealed to his innate selfishness, and made a different decision. Basically, in order to win any money in the game, each player has to convince the other player that they are going to SPLIT, then either STEAL the money or really SPLIT it. Them actually winning any money either involves complete trust – which is quite difficult between strangers – or second-guessing one another.

    3.The choices faced by Steve and Sarah are like those in Oligopolistic markets because they demand trust, although only betrayal can bring maximized profits. When oligopolistic markets collude, they assume that their competitors will keep their promises. When collusive agreements fall apart, one firm wins while the other loses. The winner loses the trust of the loser and others. Cartels sometimes fail to reach high price tags because they are worried that the other parties will not maintain their promises.

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  20. Laura Yilmazon 19 Jan 2010 at 11:18 pm

    Marcelo,

    I think your answers are very thoughtful and complete.

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  21. Trevor Tezelon 20 Jan 2010 at 5:10 am

    1. She chose to steal most likely because she understands that Steve is a spineless compromiser who would prefer to take the safe and easy route. Sarah is the real entrepreneur and is willing to make risks with the hope of a better payoff.

    2. No, Steve was not completely wrong. He wanted assurance and a guarantee of money. The only problem is is that he was risking it at the same time. He may have also known that since Sarah was going to receive money he may as well let her thrive. He does not operate by the “live and let die” philosophy.

    3. In oligopolistic markets, it is vital for firms to anticipate the moves of their competitors. This can have big payoffs or big losses. The entrepreneurial instinct must take over and the firm may have to take risks in order to survive in the highly competitive market. It is very clear why these collusive agreements fall apart. No firm is willing to trust another because each one, like Sarah, is clever, tricky and self-preserving. With the high price targets set by leaders of organizations such as OPEC, various countries will believe that the other members of the organization will undercut prices for their own profits. This leads to many other avenues for which non-OPEC countries can acquire oil for lower prices.

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  22. Mattea.echl.f09on 20 Jan 2010 at 5:12 am

    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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  23. Jacob.echl.f09on 20 Jan 2010 at 5:14 am

    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.

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  24. Mattea.echl.f09on 20 Jan 2010 at 5:15 am

    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.

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  25. Jacob.echl.f09on 20 Jan 2010 at 5:18 am

    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.

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  26. Trevor Tezelon 20 Jan 2010 at 5:20 am

    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.

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  27. Dennis.echl.f09on 20 Jan 2010 at 6:34 am

    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-

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  28. Dennis.echl.f09on 20 Jan 2010 at 6:47 am

    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-

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  29. victoria.echl.f09on 20 Jan 2010 at 7:44 am

    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.

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  30. victoria.echl.f09on 20 Jan 2010 at 7:56 am

    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.)

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  31. Eline.echl.f09on 20 Jan 2010 at 11:01 am

    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

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  32. Eline.echl.f09on 20 Jan 2010 at 11:13 am

    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

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  33. Catherine.echl.f09on 21 Jan 2010 at 2:57 am

    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

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  34. Catherine.echl.f09on 21 Jan 2010 at 3:01 am

    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

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  35. Armando.echl.f09on 25 Jan 2010 at 1:24 pm

    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.

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  36. Armando.echl.f09on 25 Jan 2010 at 1:27 pm

    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.

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  37. Seamus Coffeyon 06 Apr 2010 at 3:24 am

    A short paper using this TV show as a natural experiment of the Prisoner’s Dilemma can be accessed at:

    Economic Incentives – The Goldenballs Dilemma

    The conclusion: Gender, age, occupation and hair colour! matter.

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  38. Angelaon 06 Apr 2010 at 7:12 am

    I feel that Sarah acted in the best interest for herself even though she ended up haveing Steve gain no money. Steve and Sarah should have come to some sort of agreement during the minute they talked so they could both have possibly gone home with some money. I think the best way to handle this is to choose steal and assume that you will get something no matter what. I dont think that Steve made a wrong choice here. He based it on the thought that everyone is nice and caring.

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  39. Drew Simoninion 06 Apr 2010 at 8:46 am

    This is exactly why people don't trust each other in the real world. If we all trusted each other, the world economy will be so much better off. But, many people are only worried about themseleves and their own good. Sarah is one of those people that obvious didn't trust Steve and thought for her own good. They could of been better off together as spliting the money, but Sarah only thought for herself and had little trust for Steve. That's what is happening across the world, we could be so much better off if people just plain out trusted each other. If governments somehow figure out how to make people trust each other, we be so much better off.

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  40. Mark Valenon 26 Apr 2010 at 5:41 pm

    Richard Thaler has an interesting paper on Golden Balls:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_i

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  41. Samantha Raineron 11 Jan 2011 at 3:16 am

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah chose to take all of the money instead of split it with Steve and only get half. Sarah was following her natural instinct to take all of the money for her own "selfish" reasons. She chose to do this rather than to collaborate with Steve and share the $100,000 because she knew that Steve would much rather go home with some money instead of no money and chose to take advantage of the "weakness" that Steve showed. She was following John Nash's theory on human nature that states that humans are coldly rational, self-interested, deceptive creatures that would not hesitate to stab one another in the back to get what was best for themselves.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    I do not think that Steve was TOTALLY wrong to choose to split because Sarah had said that she would also split, and in order to get some of the money Steve chose to go against his instinct to steal. I think that he was thinking that it would be better to go home with some money than none at all.

    If I were put into Steve's situation I would have tried to convince Sarah to split instead of steal and make an offical deal with her to split (shake hands or something like that) and then depending on her reaction to what I am saying and if she seems to be sincere or not I would make my decision to either steal or split.

    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?

    Choices faced by Steve and Sarah relate to the choices faced by firms in oligopolitic markets because they have to make choices similar to there's often. If a firm is planning on doing something, they have to try to do it with only their own interests at heart. They don't really want to help the other firms gain what they want because the firm wants what is best for themselves.

    Collusive agreements between oligopolists often fall apart because the other firms are trying to get the most out of the agreement for themselves. They are acting selfishly instead of trying to work together as one. Which is why cartels such as OPEC often fail to achieve high price targets agreed upon in meetings of their leaders. They want to out do the others and have everything for themselves to earn a higher profit and revenue.

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  42. Graham N.on 11 Jan 2011 at 4:26 am

    1. Sarah chose to steal because she could maximize her potential profits this way. If she and Steve both "split", she would go home with only $50000. If she chose "split" and he chose "steal", then she would win nothing. Her profit maximizing option was to choose "steal". If Steve also chose "steal", then she would at least prevent him from winning all the money.

    2. No, Steve may have done the "humane" thing, but he did not take into account the calculating and cold nature of Sarah. I tend to place too much faith in the honesty of people and probably would have chose to split.

    3. The choices faced by Steve and Sarah relate to those faced by oligopolistic markets because the firms can either cooperate or try to undermine the other firms. If they cooperate, they might have even shares of the market. If some of the other firms undermine the others while the remainder do nothing, those firms will attract new consumers and eventually drive the non-undermining firms out of the market. If all of the firms try to undermine each other, consumers may become less interested in the good produced in this market, causing demand for every firm to fall.

    Collusive agreements between oligopolists often fail because the "safest" and most rational approach is to try to undermine the other firms and take all the profits for yourself. Cartels often fail to achieve the high prices because some members decide to sell for less, hoping to increase their demand above that of all the other parties involved.

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  43. Adrianon 11 Jan 2011 at 6:09 am

    What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    She chose steal because she realized if she chose split her best outcome would be 50000 and her worst 0. She then realized if she chose steal she would either leave with 100000 or 0. So either way she had a 50 50 chance but it was better for her to bet on steal due to the higher winnings.

    Was Steve totally wrong to choose split? What would you have done in his situation?

    No he was not because he was taking a chance on weather Sarah was not only a self interested person. Not all people would have chosen to steal. However I would have chosen steal simply because the outcome could be greater and it would be a chance worth taking.

    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?

    They relate to an oligopolistic market because they are like the choices firms make weather to set on a price with other firms. However due to human greediness one might try to cheat their way into making more profits for themselves.

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  44. Pilar M.on 11 Jan 2011 at 6:30 am

    What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah chose steal because she wanted to get all the money for herself. In the economic view, she acted as every rational human would do – she acted in her own self interest. She knew that if Steve was going to chose split, she could have her way and chose steal, hence getting all the money for herself.

    Was Steve totally wrong to choose split?

    No, Steve was not totally wrong to choose split because at least he would have gotten money. When both "players" in the matrix choose the same option, both get off okay however not better than if one of them would have taken the better option. Nevertheless, in that case only one player can benefit.

    How do the choices faced by Steve and Sarah relate to the choices faced by firms in oligopolitic markets?

    The choices of them relate to the choices faced by firms in oligopolistic markets because they also have to face "trade-offs" in the wish of pursuing their profit-maximization. If a firm wants to advertise, it will first ask itself how high the cost is and if its competitors will also advertise. Therefore, the choices faced are relatively similar.

    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?

    The problem is that, those cartels often fail to hold on to their collusive agreements. This means that many firms just want to act in their own self-interest eventually in order to maximize their profits. Thus, also the achievement of high price targets is undermined since some firms might then try to secretly sell their products for a lower price in the hope of getting their demand higher. The main difficulty lies in the inherent incentive of the firm to cheat the other firms in the industry.

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  45. Anuon 11 Jan 2011 at 7:12 am

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah chose to steal because it maximized her winnings from the game. As she could not be certain if Steve would split, she chose to steal as it would ensure that either she won all the money, or that neither players got anything. Even if Sarah could somehow convincingly deduce that Steve would indeed split the money, she was better off stealing it.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve was not totally wrong to choose split because there existed a probability (albeit low one) that Sarah would also split and each would go home with half the jackpot. When choosing split, Steve was acting in the self-interest of not being frowned upon in society. This game show, I believe, also reveals that human self-interest is not entirely dependent on money. I would have chosen to split as well, so that I would have the possibility of winning some money, and have a clear conscience.

    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?

    The choices faced in this game relate to the myriad different decisions firms in oligopolistic markets need to make which affect the end results of other firms besides themselves in the market. Collusive agreements such as those made by oil cartels often fall apart, because individual nations (or firms) have the incentive to cheat the agreement of collusion in order to make greater profits at the expense of other parties in the collusion.

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  46. Alain Meyeron 11 Jan 2011 at 7:30 am

    1. Sarah chose to steal rather than collaborate because she saw the opportunity to earn double her potential split earnings by "betraying" the man. This would mean she's earning the highest possible profit that she can earn. If she were to split, she has the opportunity to get screwed over by the man and so the it is in her rational best interest to go for the full money prize.

    2. Steve was not incorrect to choose split. He acted irrationally by working with emotion rather than thought. By choosing to steal, then they both would have at least achieved nothing and nobody was the obvious "loser". In his situation I would have stolen. If you're on a game show, you're in it to win money you didn't have in the first place. Going back with nothing isn't too tragic.

    3. OPEC adheres nicely to game theory concepts, as the firms tell the others that they'll collude at high prices, but by slightly lowering their prices, certain countries within OPEC can gain an edge. This is why they fail to achieve the high price targets. It's exactly the same concept as why it falls apart between oligopolies. They can either collude (splitting market share somewhat evenly) one of them could decide to break the collusion pact (and earn more market share) or they could all try to undercut each other, lowing the average price of oil and they all lose.

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  47. Uday Srinivasanon 11 Jan 2011 at 8:02 pm

    1. She chose to steal because he had convinced her that he was going to split. With this confidence, the rational (although selfish, but who cares about that – people are all actually selfish) thing to do for her was to steal.

    2. Steve chose the optimal decision because choosing to split gives the entire system the highest probability of both gaining. I probably wouldn't have given the whole speech at the beginning. His speech actually gave Sarah the confidence to steal.

    3. Much like in an oligopolistic market, decisions made by Steve and Sarah affect each other greatly. OPEC tries to collude despite the huge incentives for members to "betray" each other. Legal enforcements could be used to guarantee a successful collusion.

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  48. tomoya_sekineon 20 Jan 2011 at 4:16 pm

    Sarah chose steal rather than collaborate with Steve and share the 100K as there was a chance that Steve would have stabbed her back and chose STEAL to take all the money and leave Sarah with none. Again, it all comes down to greed, as she wanted all the money herself, she played a dirty trick to fool Steve into picking SPLIT. But in terms of probability, the best action for anyone in this game is to pick STEAL as they either have the chance of taking 100K or none (while SPLIT gives you the chance of taking 50K or none). SPLIT would only be useful if both players trusted each other.

    Steve was not totally wrong to choose SPLIT, as there would have been the chance of him still winning 50K. I personally would have chosen SPLIT to be humane, and not greedy even if the opponent were to be horrible in the past. However for Steve and Sarah, it might have been different as Sarah said that she was backstabbed several times so we can see how things can influence a person’s decision.

    The choices faced by Steve and Sarah relate to the choices faced by firms in oligopolistic markets as some firms in the market may combine together to form a joint venture and such, this means that both companies must share their profits and such. However the companies have the decision to either fairly split the money they get or one may try to steal the money (or both; stealing market share). For obvious reasons, I think that collusive agreements between oligopolists often fall apart as the agreement is not legal or known to anyone else. Therefore companies are more tempted to steal market shares and money from one another. I believe cartels such as OPEC often fail to achieve the high price targets in meetings as every country/representative are greedy and cannot come to the conclusion of splitting shares.

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  49. tomoya_sekineon 20 Jan 2011 at 4:25 pm

    To Alain Meyer

    I think Steve went home with a heart.. However, I agree with your statement as both Steve and Sarah are there to win money. And I guess in the real world, money is all that matters (at least nowadays in the world of business, one day you have everything, the next day it's all gone). For your third response, that has helped me understand a little better in terms of the failure of collusive agreements in oligopoly.

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  50. Nicole_Sonderegger_Non 21 Jan 2011 at 7:15 pm

    1. Sarah chose to steal because this meant she could win the whole $100,000 rather than just half the amount. At the end of the video she says that she had been cheated once before on this game, meaning that she would not risk having Steve trick her and choose to steal rather than to split. Sarah feared receiving no money, and so by choosing to steal she could ensure that she would either take all the money, or neither she nor Steve would get any of it.

    2. No, Steve was not wrong to choose to split. The way he saw it, it was only fair that they both got half of the money. Sarah seemed sincere when she said she would split it, and Steve is merely a person who is honest and trusts others to be so too. I probably would have done the same thing as Steve because I believe it is better and more fair if people split a reward, rather than trying to lie and cheat to get all the money.

    3. Firms in oligopolistic markets have to face choices similar to the one Steve and Sarah faced as they have to try and choose what is best for them, while also keeping in mind the response of their competitors. For example, firms join in a collusive agreement and decide that it is beneficial to all of them to raise the price of the product they sell. However, one firm may be selfish or be trying to protect itself, like Sarah, and say it agrees to raise price, but then end up turning against all the firms and not raising price in order to attract more consumers and increase its revenue. Lack of both trust and fairness is what often leads cartels and other agreements between firms to fall apart.

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  51. Behiye_Ilkay_Dasdemion 22 Jan 2011 at 2:41 pm

    1. Sarah chose to steal because she is aware of the fact that she could earn more than if she chose 'split'. Also, she doesn't want to share the money because she thinks that it is her right to have the money individually if the rival accepts the situation. It was a rational collusion but hopeless and cruel for Steve. She behaved a bit greedily but consciously and got the money by affecting the decision of the rival.

    2. I can’t say that Steve was totally wrong but he was impulsive so that he easily believed in Sarah’s collusion. I guess he was afraid of leaving the program without any money that is why; he confirmed that $50,000 was better than none. However, if I were in his shoes, -since I don’t want to lose- I would choose ‘Steal’, as well. Either I would take $100,000 by myself, or we would both get none.

    3. The choices faced by Steve and Sarah relates to the ones by firms in oligopolistic markets because in this market type, the decisions of the firms affect the reaction of the rivals’. Moreover, collusive agreements often fall apart because each side is eager for making some profits and they can be far from the compromise. The reason why cartels such as OPEC often fail to achieve the high price targets is that they do not trust in one another and also can be greedy because they seek for more profit than the others.

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  52. Behiye_Ilkay_Dasdemion 22 Jan 2011 at 2:45 pm

    @Nicole_Sonderegger_Norris

    I agree with you that the thing which made Steve lose is his honesty. In such kind of program honesty didn't work to win. I think that it is not fair.

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  53. Dilan_Guneson 23 Jan 2011 at 12:22 am

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah is a little bit greedy in m opinion. There are three chances having $100,000 , $50,000 or getting none from the money. Actually if this is an individual competition the thing that Sarah did is logical but as human being generally we prefer more than we need like Sarah that’s why she preferred to get all the money rather than getting half or none of them.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    Actually he is not totally wrong. Steve and Sarah talked with each other and in a way they promised each other. They had a common idea on choosing SPLIT but Sarah broke her promise. This was not Steve’s fault I would also do the same thing as Steve did. Apart from risking the all money we can share it 50-50.

    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?

    Actually in the oligopolistic markets there can be three choices like Sarah and Steve had. Having all the profit, sharing money (50%) or getting none of the money… I think the collusive agreements between oligopolists are often fall apart because all the markets want to get the greater profit than others. And also the cartels like OPEC fail to achieve the high price targets because they do not believe each other. Steve did and we know the result and Sarah said she will choose SPLIT but she did not these little tricks can be also seen between markets.

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  54. Dilan_Guneson 23 Jan 2011 at 12:25 am

    To Uday Srinivasan

    I totally agree with that the decisions that firms or Steve and Sarah made affect each other. And also as you said the highest possibility for both to get money was chosing SPLIT as Steve did.

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  55. Mehmet_Mert_Sumaon 23 Jan 2011 at 1:45 am

    1. Sarah is the person John Nash depicted. She is self-interested and deceptive. She made sure that Steve chose split and then she chose steal. 50 K was not enough for her. She was greedy and she wanted more.

    2. Steve was not wrong, but he was totally naive. He couldn't see that Sarah was deceiving. Most probably I would do the same. I would choose split as Steve did. I don't think money should matter that much.

    3.The cartels such as OPEC fail because the members are like Sarah. They are all self-interested and want to make huge profits. They can do this by lowering the prices and maximizing the output. Lowering prices mean a price warfare which would not favor any of the members. Despite price warfare risk, the member can still intend to maximize their profits. The greed of the members prevent the cartels from functioning.

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  56. Mehmet_Mert_Sumaon 23 Jan 2011 at 1:49 am

    @tomoya_sekine

    You are right that firms want to increase their market share. So, they don't collude with each other sometimes. Cartels fail to operate because of the same reason.

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  57. Julian_Cuervoon 24 Jan 2011 at 3:31 am

    1. I think Sarah chose to steal rather than to collaborate with Steve because she followed the human behavior stated by John Nash that humans were coldly rational, self-interested, deceptive creatures that would not hesitate to stab one another in the back to get what was best for themselves. Sarah knew that by stealing she would be benefited the most because the only two possibilities were that she would go home with $100,000 or that both she and Steve, who apparently stabbed her in the back before, would go home with 0.

    2. Steve’s decision was not wrong at all because his decision was based on kindness and sincereness. The video says that he has stolen before so he must have felt guilty and wanted to be kind and split this time. I would have also split because I would have thought that it would be best to not risk anything and go home with $50,000 than with 0.

    3. Collusive agreements between oligopolists often fall apart because, according to the Game Theory, humans were coldly rational, self-interested, deceptive creatures that would not hesitate to stab one another in the back to get what was best for themselves. So, there is not a trust level where actual fair agreements can take place. Cartels such as OPEC often fail to achieve the high price targets agreed upon in meetings of their leaders because people are naturally greedy and suspicious and don't want to risk losing a profit.

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  58. Julian_Cuervoon 24 Jan 2011 at 3:33 am

    To Nicole_Sonderegger_Norris,

    I agree that Sarah chose to steal because it was a personal win-win situation. She could have either been able to go home with $100,000 or make sure Steve would also go home with $0 if he also chose to steal. It would have been extremely risky to choose split and she has already been stabbed in the back before.

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  59. Nicole_Sonderegger_Non 24 Jan 2011 at 7:47 am

    To Masaya.echl.f09

    I think you are being a little tough on Sarah. I agree that what she did was very mean and selfish, but her behavior is typical of many people in the business world. To be successful at times people and firms must do what is best for them, even if it is "cold and deceptive". It would be so much nicer if people would share and care not only about their own success, like Steve, but unfortunately this is not the case. Sadly, many think only about themselves and take advantage of the 'weak' by making them believe they can share things and then stabbing them in the back and taking everything away from them.

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  60. tiffany_williamon 24 Jan 2011 at 6:35 pm

    1) this is about the nature of person. everybody needs money, which is absolutely right. By choosing steal, Sarah has the 3/4 possibility of getting the money. And only one possibility of not getting anything, that is when Steve chooses to steal as well. This shows, many people will try to maximize their profit or the chances of being able to get as much money as they can.

    2)In an economic view, Steve is wrong. Well, he could have bring home money by choosing split. However, not in full amount. At least he needs to share it with Sarah if they both choose split.

    But in this case, Steve is being considerate. His intension is not to maximize and the whole money while Sarah goes home empty handed. by choosing split he either gets half of it, or unluckily goes home without anything.

    3) Sometimes the arguments fall apart because each individuals will always want to maximize their profits and earn as much as they can. Sometimes firms are afraid that they are not able to earn as much profits as they can by sharing thoughts and ideas because by then they must have shared their profits. There may be agreements, however during the process each firm may try to run away from the agreements and do not compromise with the other firms, which may lead to earning low profit.

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  61. tiffany_williamon 24 Jan 2011 at 6:36 pm

    @# Julian_Cuervo

    i agreed with your comments. you should never put your 100% trust in others especially when you're dealing with money. People may have bad thinking behind our backs while putting innocent faces in front.

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  62. Haleigh_Eppleron 24 Jan 2011 at 10:17 pm

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah chose to steel because she was looking at self gain. She had the chance for the greatest return by choosing steal rather than split. If she chose split the highest return she could get was 50% where as if she chose steal she had the potential for getting 100% return.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    I would have chosen steal because it gives you the chance for the greatest return. Steve chose split because he was attempting to be moral in his choice. By choosing split, he was lowering his maximum possible outcome by sharing with Sarah knowing that Sarah may not have the same inclinations. There is also the possibility he knew that if he chose steal and she chose steal he would end with nothing so he had faith that she would not chose steal so as to ensure she would have an outcome. As I stated though, this requires that both believe the other will do this.

    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?

    An example of OPEC is not necessarily fair because OPEC often achieves their abnormally high prices limiting competition and increasing oil prices. However, the decisions of Steve and Sarah are similar to those of oligopolistic competition because all firms in the market wish to achieve their highest possible profits without being robbed by the other firms not following through on their promises in meetings. The collusive agreements fall apart when people are put under the pressure and believe that the other members will not follow through. In self preservation, the firms will do what they can to achieve maximum profits even if this means ruining an agreement.

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  63. Kang_San_Keumon 25 Jan 2011 at 1:47 am

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah chose to steal rather than to collaborate with Steve because she wanted to maximize her own profit. By the talk before the balls where chosen, Sarah deduced that Steve wanted to split because he would be satisfied with half of the money each. Sarah knew that and she chose steal to take all the money herself.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve was not totally wrong to choose split because he would be happy to earn even half of the total price. By choosing the split ball, he had a higher chance of having a return while with the steal ball you could end up with all of the price or nothing. In that situation I would have chosen the split ball because that way some one will win the money while if I would choose the steal ball it would be more probable that the other person would also choose the steal ball hence both end up losing.

    3. How do the choices faced by Steve and Sarah relate to the choices faced by firms in oligopoly 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?

    These choices are the same as the ones that oligopolists face every day. This is because in an oligopoly, your choice changes the competitors strategy and plan. For instance, if Pepsi introduced larger bottles at a same price, Coca Cola would have to match the playing field or it would lose all the profits. In this case, Pepsi would take the steal ball and Coca Cola would end up with the split ball. Oligopolists fall apart when all the firms of the oligopoly get greedy and want to maximize their return. This may happen if all the firms lower the prices at once or if all the firms raise their prices to the maximum. Cartels such as OPEC fail to achieve high price targets because always some one will change their mind in order to get the maximum returns.

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  64. Kang_San_Keumon 25 Jan 2011 at 1:49 am

    @ Haleigh_Eppler

    I agree with most of your points but I have to disagree when you go for the steal ball because if you get to greedy you will end up losing all the money instead of maximizing your return.

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  65. william_overhauseron 25 Jan 2011 at 5:48 pm

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah realized that since Steve was going to choose split, she could choose steal and take all the money rather than half of it. She was taking a risk that Steve wasn't going to also choose steal, because she would leave with nothing, but the risk paid off well.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve was hoping that Sarah would also choose split, which isn't that bad of an assumption. I would have done the same in his situation because choosing steal just seems so rude.

    3. How do the choices faced by Steve and Sarah relate to the choices faced by firms in oligopoly 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?

    The choices are similar because you make your decisions based on what you think the other will do. Collusive agreements often fall through because one firm will undercut the others for their own gain. The collusive agreement is the same as the split ball.

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  66. Cleoon 26 Jan 2011 at 2:38 am

    What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah would choose to steal because she is convinced that Steve will choose split, therefore she is sure she will receive the $100,000.

    Was Steve totally wrong to choose split? What would you have done in his situation?

    I would choose split, but only if i was sure that the other person would choose split. By choosing steal, there is nothing to loose if the other person chooses steal.

    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?

    Companies have to anticipate one another’s choices, in order to create maximum profit. if everyone lowers price, than no companies makes profit. If one companies lowers price, than that company gets all the profit. If all companies hold their prices steady, than there will be shared profits. Collusive agreements between oligopolists fall apart because companies have the best opportunity to betray another and take all the profit.

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  67. Cleoon 26 Jan 2011 at 2:42 am

    @Nicole_Sonderegger_Norri

    Taking advantage of people and backstabbing is not always the best solution though. In the business world, betraying another firms trust may come back to bite you. For instance, not being able to work together again, or borrow money.

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  68. Talia_Greeneon 26 Jan 2011 at 2:51 am

    1. She chose to steal so that she would have the chance to win the full amount of money and, if Steve chose to steal as well, she would at least know that she thwarted his attempt to take all of the money.

    2. Were I Steve, I would likely have chosen steal because I would know that my opponents’ dominant strategy would be to steal.

    3. In both situations, individuals must make decisions based on what others might do. Such agreements often fall apart because the dominant strategy for the individual companies is to maximize their own profits.

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  69. Talia_Greeneon 26 Jan 2011 at 2:59 am

    @ Cleo:

    I thought the point you brought up about what your decision would be if you were sure of the other person’s decision was interesting, as it changes your decision so much. The problem is you don’t know the other persons decision, so I would probably still choose steal, as that way I at least have a 50% chance of winning the full amount of money, which is a pretty good chance.

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  70. william_overhauseron 26 Jan 2011 at 3:41 am

    @ Cleo

    I would argue that there is something to lose by choosing steal, because is the other person chose steal as well, you leave with nothing, whereas the other two scenarios leave you with at least some money.

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  71. Huanni_Wuon 26 Jan 2011 at 8:32 am

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Self-interest is human nature. Sarah tried to maximize the profit she could possibly get and she assumed that Steve was honest and would obey what he had promised. Once one people in the game showed intention of choosing SPLIT, it meant the risk of getting nothing of the other person decreased. Since whatever she choose she would possibly get at least $50,000, it was reasonable that she chose to STEAL and got the $100,000 herself.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    If Sarah was determined to choose STEAL, no matter what Steve chose he would get nothing. So he wasn’t totally wrong to choose SPLIT. But if I was Steve, I would have probably chose STEAL. This is because in the game, whether I win or I lose. The chance of win and lose equal to each other. If I happen to win, that is when I successfully persuade the other player to choose SPLIT. I can have a choice to maximize my profit without having any risk. So I would choose STEAL.

    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?

    The situation which Steve and Sarah were in was whether share a decent profit together or win a grater one by one’s own. This is similar with firms in oligopolistic markets because firms in oligopoly interact with each other too. A decision of one firm such as price change will affect not only a firm itself but also its competitors. For example, a firm wants to lower its price in order to get more market share. Ideally as the price decreases the quantity demanded will increase, plus oligopolistic firms have inelastic demand curve so the profit of this firm should have increased. But this decision will actually decrease the demand of products of the other oligopolistic firms, so it is predictable they will also lower their prices to the same level as the first firm to retain profits. Thus the decision of the first firm will end up with a lower market price and the same quantity demanded of each firm in oligopoly. The first firm wouldn't have made the price change if it had considered the subsequent effect. That’s why oligopolistic firms are likely to be collusive if they want to maximize the overall profit.

    And it’s usual that oligopolistic firms sometimes break their promise. That’s because the firms want to maximize their profits. OPEC fail to achieve the high price targets because some firms tend to lower their price after knowing that other firms are all going to increase prices. This make these firms gain most market share and then they can make more profits.

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  72. Huanni_Wuon 26 Jan 2011 at 8:42 am

    @Nicole_Sonderegger_Norris?

    Yes what happened to Steve was unfair. The game designer must have been looked through the self-interested nature exist in human beings and he believed the players who choose STEAL would be more than people choose SPLIT. And in fact most of the people do meet his expect and that's the way the programme earns money.

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  73. Bahar Erdo?duon 26 Jan 2011 at 10:44 am

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    It is about nature of human, humand beings are selfish and they want the maximum profit whatever the conditions are.Sarah tried to maximize the profit and she had the advantage of honesty of Steve.Steve also could choose the steal one but Sarah trusted him and steal the money.She just thought that if he choose split I can win if he choose steal we both lose the money and also he doesn't win the game. She just maximised her profit.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve wasn't totally wrong about choosing split, because he didn't want to make Sarah lose the money and he just offered to split the money so that both can win the game, but the wrong side of the Steve was that, he trusted Sarah and took the risk of having nothing.He forgot that human nature wants more of what they have.However, if I was Steve, I would have probably chose STEAL. If I lose the opponent will lose too, but if I win I will win and go away. 50% chance is here.

    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?

    The situation which Steve and Sarah were together was about sharing profit together or win a grater amount than the other one. This is same with firms in oligopolistic markets because firms in oligopoly interact with each other too like Sarah and Steve do. A decision of a firm about price or profit will affect not only itself but also its competitors.If they want to maximize the overall profit they should make the other competitors worse.

    And sometimes oligopolistic firms sometimes break their promise and it is because of that the firms want to maximize their profits.

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  74. Bahar Erdo?duon 26 Jan 2011 at 10:48 am

    Huanni,

    I agree with you about choosing steal and there is a chance to win or lose. Other thing is it is human nature to maximise his/her own profit.

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  75. Dogan_Can_Ozcanon 26 Jan 2011 at 1:19 pm

    1-) What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    This video doesn't tell us only about economic situation it also tells us about the human beings. Steve and Sarah are like two companies. Both companies want to have maximum profit. But Sarah wants the biggest profit. Steve was trusting her . But Sarah said "steal" and maximised her profit.

    2-) Was Steve totally wrong to choose split? What would you have done in his situation?

    I think Steve was wrong. Because he trusted Sarah. He thought that if Sarah choose split they both win the game and take the money. But Sarah wanted more money. Steve took the risk, having nothing. If I was Steve I would choose 'steal' because this is a strategy. If you lose, your teammate loses, too. But if I win I would have the 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?

    As I said in the 1st question Steve and Sarah are like firms in oligopolistic market. As we know in oligopoly, firms are in contact with each other. Like in this competition decisions affect everybody. In oligopoly a firm decides to do something but this decision doesn't affect only that firm, it also affects the other firms. But sometimes oligopolistic markets don't do the things they should do, like Sarah does. They want to maximise their profit.

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  76. Dogan_Can_Ozcanon 26 Jan 2011 at 1:22 pm

    @william_overhauser

    Your opinions are good but in 3rd question if you give more specific examples or if you connect your answer with real life it would be better.

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  77. Asucan_Odcikinon 26 Jan 2011 at 2:52 pm

    1)Sarah chose to steal because she thought that she could own the money by herself rather than sharing it. I think she was greedy a lot and she wanted the money more than Steve. So she behaved in the way that Josh Nash explained. Shortly she maximized her profit by taking risks.

    2)I cannot say he was totally wrong on his decision which was “to split”. Of course he thought that half of the money is a lot better than having nothing at the end. I think Steve played the logical part of the game but to have money and to reach your aim you need to take risk rather than playing safe. So if I would be him, I would choose “to steal” in order to have the maximum amount that I could have or to have nothing(both of us).

    3) In oligopolistic competition it is very similar situation that we see in Steve and Sarah’s situation. In both of them there should be some decisions which requires risks to reach the most profitable one. But while doing that for example a firm also should need to think about its rival’s strategies in order not to lose from its profit. It was like in Sarah’s situation she took risk and chose to steal but while she was doing that she also thought Steve’s decision which could be also “to steal”. They could also be in agreement like firms joining a collusive agreement. But they did not as Sarah was selfish about her decision which is exactly the same situation where a firm also does not want to have an agreement with other firms and wants its own strategies to take place. I think why OPEC fails to achieve the high price targets is lack of trust between firms. One firm does not trust the other so most of the time they cannot make an agreement as some firms decides to make their own strategies to have more profit than the other firms.

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  78. Asucan_Odcikinon 26 Jan 2011 at 2:58 pm

    @tiffany_william

    I agree with you about your third answer. Because I think to use the verb "run away" is a very right choice to explain firms behaviour on agreements. As they want to maximize their profits they usually run away from agreements which one firm could make profit than other firm. But I think you should also add lack of trust as well. Because the whole reason behind it, is lack of trust between the firms.

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  79. Ashini Jagtianion 26 Jan 2011 at 8:40 pm

    At the end of the video Sarah said that she had been betrayed before and therefore did not trust anybody maybe that was the reason why she chose to steal. Also she must have been confident that Steve was going to spilt and that there were no chances he would steal so she took the risk of stealing

    According to me Steve should have and could have convinced Sarah and taken more time to guarantee that he’d split. Should he would have chosen to steal none of them would have got a penny because Sarah was determined not to split.

    When two firms guarantee each other to set a price one of the firms will backstab and lower their prices in order to attract customers. In this case they will increase the variety and decrease the price. If they reach the conclusion of increasing prices then both will be at a loss, rather one company will think of breaking the agreement and earn profits.

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  80. Ashini Jagtianion 26 Jan 2011 at 8:42 pm

    @Asucan_Odcikin

    I never thought about Sarah being greedy, I always thought she was betrayed and thus chose not to take a risk. That is a good point of view though

    also I agree that there is always the lack of trust in such situations and usually it is the case that people/firms who keep trust are often back stabbed.

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  81. Kansu Aydoganon 26 Jan 2011 at 10:31 pm

    1.) People's desire never ends, it is because we are selfish and it is in our nature, as many of us pointed out. Sarah chosed steal, because she had already known that steal will make more profit than the 'split'. Furthermore, she also refused the idea of sharing the money with sb else., and that was something cruel for Steve.

    2.) The reason why he can be wrong is that he easily believed in Sarah. However, ? think he didn't want to leave without any money, so that he except little amount of money. But if ? were him, ? would have talked to Sarah that she has to share or I would Steal.

    3.)In oligopolistic competition, there should be some decisions that involve some important risks to get the highest profit as in Sarah's and Steve's situation, but the firm should always think about the reaction or the attitude that its rival will have, and make some strategies according to that.

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  82. Daniella Majlufon 27 Jan 2011 at 4:47 am

    1. Like this article says, most people are coldly rational and self-interested. Sarah had two options, whether she chose split and collaborated with Steve or she chose steal and get all the money to herself. She had to make sure that Steve was going to choose split so that she could calmly choose the steal ball and leave with the money. So Sarah is a self-interested person that doesn’t care about other but cares only about her and the money she gains.

    2. Steve wasn’t at all wrong when choosing split because this shows us that he is a nice person that believes easily in other people and cares about them, too. It is a decision that I would have made also, but I wouldn’t have told Sarah the truth because what it did was to assure her and make her choose steal.

    3. The choices made by Steve and Sarah relate to the choices faced by firms in oligopolistic markets because each of their actions was interdependent on each others’ actions. They had to trust each other on what they said that they were going to do. Cartels such as OPEC often fail to achieve the high price targets agreed upon meetings of their leaders because most of the time they don’t trust each other and they need to be careful because people lie and are self-interested.

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  83. Daniella Majlufon 27 Jan 2011 at 4:51 am

    @ Talia_Greene

    Your answers are great. Sarah did choose steal to make sure that either she got all or nothing at all, and Steve shouldn't trust people that easily because it led him to losing everything. And it is true than in both situations the action of one person depends on the other's actions.

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  84. Bryan_DiLauraon 27 Jan 2011 at 6:56 am

    1. Sarah was very clever in this, however I believe that it was extremely cold-hearted. She had made sure that Steve was going to share, by making him promise and everything, then she just chose steal to get more money. I personally think it's a horrible thing to sacrifice your personal integrity, including significantly hurting someone, just for more money, but some people are ok with it I guess.

    2. I think that Steve was right in choosing split. And I would have done the same in that situation. However I may have had Sarah want to double check herself, and not think that I would split for sure. She would not want to risk not getting anything, so she would be more willing to go for the split.

    3. The choices Steve and Sarah made are very similar to oligopolistic markets. This is because they are interdependent. If one is aggressive, while one is passive, the aggressive one can make lots of money. However if they are both aggressive, they can both end up being hurt, etc. This also explains how cartels can fall apart easily, because as we have seen, it is very easy to lie for personal monetary gain like that.

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  85. Bryan_DiLauraon 27 Jan 2011 at 6:59 am

    @Ashini Jagtiani

    I think that it is interesting that you brought up the point about her being betrayed before. I think that this could also play a part in oligopolistic markets. If a firm has been back stabbed before, they may be more willing to back stab someone else.

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  86. Ece_Erdemon 27 Jan 2011 at 10:34 am

    1) People are selfish and they are self-interested, they all want it for themselves. So Sarah chooses to steal, in order to gain all the money but it is a very greedy and deceptive behaviour. It may seem sensible or reasonable to some extent, but I don't think that it is the right thing to do.

    2) I don't think that Steve was a hundred percent wrong but he should have argued this situation with Sarah more clearly. Sarah didn't say that she is going to choose split for sure, but she was only asking for Steve to choose split, she didn't give clear messages, and Steve didn't think his own interests, he was not selfish and thinking Sarah, which leads to a fairly wrong decision.

    3) I think it relates to the firms' decisions. It is often not collusive agreement succeeding, because the firms are interested only in their interests, and there can be the country's interests too. So they choose to betray even though they agreed on the same thing. Opec cannot succeed on high prices, because again the selfishness of the companies prevent them to set high prices and act accordingly.

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  87. Ece_Erdemon 27 Jan 2011 at 10:37 am

    @Ashini Jagtiani

    I also think that you brought something which I haven't thought about it before. Yes, she may be deceived before and this can sound like a revenge for her. Also, it is the same in the markets too, because once you are betrayed by a firm, then you act more conciuosly and you will be alerted next time. Moreover, you can also choose to betray if you see yourself hurt and see betrayal as useful.

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  88. Merve_Akpinaron 27 Jan 2011 at 12:00 pm

    1)Sarah is very wise while she chooses steal. If she chose split, at most she would earn 500,000. But now, she has a chance to win 1,000,000. Because she eliminated the chance of Steve.

    2)Actually Steve was not totally wrong. He used his human instincts and thought that sharing would be okay but he got wrong signal from Sarah and deceived by her.

    3)The choice that Sarah has been made s really related to the real life in the market system. Because she chose to steal, which lead really negative consequences for Steve and it is the same in the real life marketing. OPEC cannot succeed because each of the firm considers their interests and they do not want to negotiate sometimes.

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  89. Merve_Akpinaron 27 Jan 2011 at 12:02 pm

    @Ece_Erdem

    I agree with you. I think the firms don't want to negotiate sometimes because they want to maximise their profits and they can be very selfish in a capitalist world. So, collusive agreement can be hard sometimes.

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  90. Ozge_Elif_Ozeron 27 Jan 2011 at 12:45 pm

    -What in the world is going on here? Why did Sarah choose to steal rather than collaborate with Steve and share the $100,000?

    1- In this competition, Sarah chose to steal rather than to collaborate with Steve, because she decided to trust on her logic instead of the threatening of Steve. By choosing to steal, she chose to maximize her achievement by gaining more profit.

    -Was Steve totally wrong to choose split? What would you have done in his situation?

    2-This is a very sensitive situation, but If I were Steve, I would do the same thing because his only fault was not to communicate and discuss this issue with Sarah more convincingly. He could have threatened Sarah in the same way that she had done to her or maybe he could have observed the facial expressions of Sarah while they were deciding what they were going to choose.

    -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?

    3-I think the choice that Sarah made can be related to the real life situations. In oligopoly, people consider their own interests, and this causes the others not to make collusive agreements. OPEC cannot achieve the high price targets because some of the firms can break the promises they make afterwards.

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  91. Ozge_Elif_Ozeron 27 Jan 2011 at 12:47 pm

    @Ece Erdem

    I also agree with you in terms of people being selfish and considering their own interests, that's why everyone is unable to make sensible decisions containing agreements.

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  92. Gunnhildur Ómon 27 Jan 2011 at 2:01 pm

    What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    The choice that Sarah made to choose steal shows how selfish people can be. She said that she had been stabbed in the back before and was not going to let that happen again and therefore she choice steal. When they spoke before they choice they both said that they were going to split, if she was in any doubt that Steve was not going chose split she would not be better off by choosing steal because then they would both get nothing. However her decision is the logical choice because we have to assume that there is a 50/50 chance on what Steve was going to pick because it could just as easily be that he was very selfish and was going to choose steal. Therefore if there was a 50/50 chance then she had a 50% chance of getting all the money and 50% chance of getting nothing, but still eliminating the chance that Steve would get the money. For the other choice split she had a 50% chance to get half of the money and 50% chance of getting nothing and Steve would have gotten all the money. Therefore by choosing steal she is certain that she will not get less than Steve. This game is based on trust between two people that do not know each other well, and therefore our human instinct is to think about ourselves and therefore it is hard to trust the other person.

    Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve and Sarah had exactly the same choice to make, Steve choice to trust Sarah that she would choose split. This show that Steve is not as greedy as Sarah because if he believed she would choose split he could just as well choose steal and take all of the money. After watching the video I do think that I would not give away my choice. Because if I convince the other person that I am going to choose split then they can choose steal if they are convinced and then taking all the money (as in this case). It is hard to say what the right thing is because we can never know how the other person thinks.

    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?

    Firms in an oligopolistic market often try to reach an agreement on prices and by that they are splitting the profits. However just as in the game that Sarah and Steve participated in they were able to betray the agreement and choose steal and by that taking all the profit. This is similar in the agreement that firms in oligopoly make because one firm can betray the agreement and undercut other companies that were involved in the agreement and therefore taking all the profit for themselves. However the thing is that if both firms decide to undercut the other firm then neither of the firms will gain profit. The same principle applies in those agreements between firms and in the game, people can be selfish and it is hard for ‘strangers’ to trust each other because of this human instinct.

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  93. Gunnhildur Ómon 27 Jan 2011 at 11:20 pm

    @ Ece_Erdem

    good point, that Sarah never said that she would definitely choose split, she was only asking him if he was going to choose split. She had the initiative and was quicker to ask him and she acted as she would be the victim because she made him think that she was going to choose split.

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  94. Muhammet_Murat_Sekbaon 28 Jan 2011 at 9:15 am

    1)What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Actually, Sarah have two options. One of them is take and walk away with 50K or take risk to get 100K. Also, Sarah has conversation with Steve about the situation and she wants him to trust her. Therefore, Sarah wants to make maximum profit and not willing to take 50K, but Steve is willing to take just 50 K.

    2)Was Steve totally wrong to choose split? What would you have done in his situation?

    I think, Steve wasn’t wrong by choosing split. Because, If I put myself into his shoes I would also choose split. Because his thought is that to safe his money. As I saidwould choose split because,” anything is better than nothing. “

    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 oligopoly market structure, their situation is an competitive oligoply, then , the competitive oligopoly changes into collusive once. Both Steve and Sarah had to options:first agree to get a specific price or they can choose the steal and make a huge amount of profit.

    Generally selling a product in a cheaper price can attract a consumer. OPEC has major effect on the market. As leaders attempt to sell oil at a cheaper price, they can affect many costumers. OPEC is trying to take control of it and to set some standards for them.

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  95. Muhammet_Murat_Sekbaon 28 Jan 2011 at 9:17 am

    @Ece Erdem

    I agree with your response. As you said the firms mayn't want to negotiate sometimes because most of the time they want to maximise their profits .

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  96. Francisco_Jose_Carilon 28 Jan 2011 at 5:10 pm

    Sarah chose to steal because, like most humans, they only care about themselves. She was really cleaver, if she chose to split then she would have had only 50k but by choosing stealing she had the possibility of having 100k or nothing. She knew that steve was going to split but so she did, objectively the best decision.

    I dont think he was totally wrong, I don't think one should criticize someone for trying to be a fair person. In the aspect of the game, he was totally wrong because either way he would be leaving with 50k and had no possibility to go with the 100k. I would have probably chosen split, but one never knows until one is in a situation like that.

    Their choices reflect oligopolitic markets because it reflects what a Cartel is. In here they both represent companies with similar goals/products that are trying to work as a team in order to keep profits up, if one of them chooses to betray the other they will almost certainly get more profits, and since they are not obligated to follow the "rules" they will do it. This explains why sometimes the markets fall apart, because both parties choose to betray and they end up loosing money. OPEC is unable to get really high prices because there will always be a company that chooses to sell at a lower price to boost their sales, obligating the other companies to to so.

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  97. Francisco_Jose_Carilon 28 Jan 2011 at 5:15 pm

    hello Gunnhildur Ómarsdóttir.

    I agree completely with your answer to the second question. The hard part in here is knowing what the other person thinks, because you cannot know. This reminds me of a similar game we did on a class. Each person had to write in a little piece of paper the letter A or B. If everyone wrote A, the whole class got 2 points extra on their grade. If 1 person wrte B then he would have 4 extra points and no one else would have extra points. It turned out everyone wrote A. That proves that sometimes people are not as greedy as we think (Or maybe have a good sense of self preservation jaja).

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  98. mboadeon 29 Jan 2011 at 10:34 pm

    What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Even though it seems shocking what happen in the program this situation occurs every day in the world. Sarah choose steal rather than collaborate with Steve because humans are greed and prefer individual success than the success of the rest in this case Steve.

    Was Steve totally wrong to choose split? What would you have done in his situation?

    Steve was not totally wrong to choose to split because if he had chosen to steal then he will go home the same without any money; choosing share gave him the “satisfaction” of remains with values. If I had to take the decision of steal or share I will choose steal no matter what the other person tell me in that moment.

    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?

    The choices faced by Steve and Sarah relate to the choices faced by firms in oligopolistic markets because they need to get to agreements but at the end betraying the agreement will make the company be more successful than the others like Sarah. Collusive agreements often fall apart because the benefit is higher even though the risk is higher.The lack of trust and agreements between the parts in the OPEC cause the often fail to achieve the high prices targets agreed upon in the meetings of their leaders.

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  99. mboadeon 29 Jan 2011 at 10:39 pm

    Hi Francisco I agree with your answer in which you respond to the question about the OPEC. You say that they often fail in their agreements because some of them get more profit by betraying the other members. This also happen in other markets as well in other circumstance like in the video of the article.

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  100. Saugata Mittraon 04 Feb 2011 at 3:41 pm

    1) Sarah chose to steal rather than collaborate with Steve because she already knew that Steve was going to "Share" with her, therefore, it would make the most sense, profit-wise, to Steal the wealth away from the gullibility that Steve exudes.

    2) Steve was "morally" in the right, but economics-wise in the wrong. Using a payoff matrix, it is clear that either you get half the wealth if you share, or you get nothing. Whereas, if you steal, you get either the entire wealth or nothing.

    3) Firms in oligopolistic markets face similar decisions: either they choose to advertise, or they don't. This could either benefit, or hurt the firm. Cartels such as OPEC fail to achieve the high price targets because they believe that not adhering to the collusive rules that they have set will benefit their firm in the long run.

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  101. Philippaon 05 Feb 2011 at 1:49 pm

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Because Sarah had made Steve genuinely promise that he was going to “split”, the rationally economic thing for her, the self-interested human, to do was to “steal” because she knew that she could steal all the wealth.

    2. Was Steve totally wrong to choose split? What would you have done in his situation?

    Economically, Steve was wrong to choose to split because if he had considered his strategies pertaining to the pay-off matrix, he would have realized that he could either steal all the wealth, or steal the chance for his opponent to steal all the wealth from him. Either way, he would have gone away feeling satisfied. Depending on the circumstances, I would have chosen different options. If I didn’t like or believe the player, I would have stolen, but if I was Sarah in this game, I would have split because I believed that Steve was going to split.

    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?

    Firms in Oligopolistic markets are interdependent and must consider the actions of their rival firms. An example would be the decision about whether to advertise a product or not. Advertising costs money, increasing the firm’s costs and potentially decreasing profits, therefore the firm could be better off not advertising. However, if the rival firm chose to advertise, the loss would be much greater to the other firm than if they both advertised. Therefore, the dominant strategy would be to advertise, regardless of what the rival firm does. Oligopolies involved in collusive agreements are also coldly selfish, economically wise firms, and will always try to maximize profits, regardless of the ‘back stabbing’ it involves. This is why cartels such as OPEC fail to meet high prices, because individual firms in the long run don’t abide by the rules that were set in the leader meetings.

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  102. Juan_Manuel_Arguedason 06 Feb 2011 at 1:53 am

    Well, for the first question, what is going on is a person who wants to share the final price and a person who wants it all. Sarah choose steal rather than collaborate with Steve and share the $100,00 because she had two arguements. The first one is that she was so convinced that Steve would choose split because she believed what he said. The other arguement is that she wanted all the money, and by having the first arguement, then she would definitely win all the price.

    Steve was not totally wrong, now that he was confident that Sarah would choose split, due to the horrorized face he did when he read, steal. He wasn't wrong also because he wanted to share, and was not selfish. I would have chosen split as well because I would love to have $100,000 just to myself, but being selfish is another completely different and very bad thing to do.

    The choices faced by Steve and sarah relate to the choices faced by firms in the oligopolistic markets by showing that firms are interdependent from each other. If one firm has better qualities and better in everything, then obviously that firm will win everything. Collusive agreements between oligopolists often fall apart because firms just want the best for themselves. Cartels such as OPEC often fail to achieve the high price targets agreed upon in meetings of their leaders because fo the same reasons. Since others will just be selfish, then they won't achieve anything.

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  103. Juan_Manuel_Arguedason 06 Feb 2011 at 2:08 am

    @Saugata

    I agree with you with your first answer. This is because I also believe that Sarah knew or trusted Steve that he would choose split instead of steal. This would make her confident about choosing steal.

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  104. Suyeon Soon 25 Feb 2011 at 6:12 am

    1. I think Sarah choose to steal because she wanted to maximize her profit. According to the Nash equilibrium, she would get $10,0000 if she steals from Steve. And since she wasn’t able to fully trust Steve whether he would choose split or steal, it would be the best to choose steal because if both choose steal, then both wouldn’t get anything, which sounds kind of fair, but if Steve choose split, then Sarah would get all the money, which is the best option for her.

    2. I don’t think his choice was totally wrong. When we look at the percentage, since it is considered to be the safest way that can satisfy both people in this game show. I think it was the matter of trust. Steve trusted Sarah and thought that she would split the money so both of them would be satisfied from the result. However, Sarah suddenly betrayed based on her desire to earn more money. So it could be said that the miscalculation about the other’s intention was the reason why he lost this game, but his choice itself was not a bad choice.

    3. This could be applied to the oligopolitic market, because like the game show, only few people are in the market and willing to split the large amount of money to satisfy their desire. In oligopoly, there are only few big corporations in the market that want to share profits from that market. I think that’s why corporations sometimes collaborate to increase or decrease the price of goods together, so both of them would be able to earn money. In Korea, for instance, the school uniform market is a oligopoly since there are only three companies that make school uniforms for all the high schools in Korea, and the three companies were accused for increasing the cost of school uniform together, to magnify their profit. However, this negotiation would not work sometimes if one betrays the others. In the market, if there are similar products, people tend to buy cheaper one. So though they promised to increase the price of their goods, if one company keeps their price low, then their profit would increase but others would not, because consumers would only buy the cheaper goods.

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  105. Suyeon Soon 25 Feb 2011 at 6:15 am

    @Juan Manuel Arguedas Rodriguez

    I think your answer for the first one is really good. You described how did Sarah's way of thinking developed to make final decision. And i totally agree with your second and the third answer.

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  106. Gökçe G&on 18 Mar 2011 at 8:35 am

    *Sarah realized that since Steve was going to choose split, she could choose steal and take all the money rather than half of it. She was taking a risk that Steve wasn’t going to also choose steal, because she would leave with nothing, but the risk paid off well.

    *Steve was hoping that Sarah would also choose split, which isn’t that bad of an assumption. I would have done the same in his situation because choosing steal just seems so rude.

    *The choices are similar because you make your decisions based on what you think the other will do. Collusive agreements often fall through because one firm will undercut the others for their own gain. The collusive agreement is the same as the split ball.

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  107. Muhammet_Emin_Uylason 18 Mar 2011 at 3:37 pm

    1.Because when Sarah choose steal, she may maximize her profit rather than sharing profit but she is taking risk because Steve may also choose steal so both may lose money. By choosing steal Sarah may profit 100k if Steve wants to have profit so this strategy is better for Sarah.

    2.Steve wasn’t totally wrong while he is choosing split because it is more humanistic choose in that deal because if Sarah also choose split they will share profit equally but there is risk on choosing split because Sarah may not want to share profit and she can choose steal to maximize her profit.

    3.In oligopolistic markets, firms should also have strategies while they are deciding on prices because it may affect them badly or they can maximize their profits so it is same as oligopolistic markets. And we can see hear collusive agreements between oligopolists often fall apart because they cannot maximize their profits. Lastly, cartel may also fail markets because again they cannot reach maximum price to maximize their profits and by doing that firms are sharing their profits.

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  108. Nesibe Zirzak?ranon 18 Mar 2011 at 4:09 pm

    1. What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?

    Sarah chooses steal rather than collaborating with Steve because she wants to maximize her profit, if she shared it with Steve, they would have to equallly share the money gained.

    2. 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?ü

    It is like the model of oligopolistic markets. They consider their maximum profit and behave according to it. Firms should come up with strategies in order to gain maximum profit and in this situation Sarah chose to steal because it was the most maximizing process.

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  109. Arthuron 29 Apr 2012 at 9:15 pm

    Hi there, I've written about the Nick/Ibrahim game here if anyone is interested: http://www.tutor2u.net/blog/index.php/economics/c… Feedback is highly welcome. :)

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  110. FT Alphaville » Further readingon 11 May 2012 at 8:17 am

    [...] – Talent shows and game theory (and here) [...]

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