[MUD-Dev] Decision making...

[ceo]

J C Lawrence wrote:

> From:

>   http://msnbc.msn.com/id/5570554/site/newsweek/

> Excerpt:

>   Economists have many ways of demonstrating the irrationality of
>   their favorite experimental animal, Homo sapiens. One is the
>   "ultimatum game,"

...

>   As predicted by the theories of mathematician John Nash (subject
>   of the movie "A Beautiful Mind"), A makes the most money by
>   offering one dollar to B, keeping nine for himself, and B should
>   accept it, because one dollar is better than none.

Personally, I have always thought that was "wrong". There is nothing
valuable in predicting the theoretically most profitable outcome -
that's trivial; the only true value is in predicting the practical
most profitable outcome.

>   But if you ignore the equations and focus on how people actually
>   behave, you see something different, says Jonathan D. Cohen,
>   director of the Center for the Study of Brain, Mind and Behavior
>   at Princeton. People playing B who receive only one or two
>   dollars overwhelmingly reject the offer. Economists have no
>   better explanation than simple spite over feeling
>   shortchanged. This becomes clear when people play the same game
>   against a computer. They tend to accept whatever they're
>   offered, because why feel insulted by a machine? By the same
>   token, most normal people playing A offer something close to an
>   even split, averaging about $4. The only category of people who

...and I thought the point of the game is that A should always give
away $8 (or, possibly, $6).

On the observation that people tend to give away half of what they
received for free (in much the same manner as they make common
mistakes on probability questions, people make a common mistake here
of thinking there's something "right" about a 50-50 split), if you
give them 8 they will feel indebted to you and give you money back
over time, perhaps in kind. They will feel their "debt" to you
(incurred because you sacrificed your potential fair profit for
their benefit) is fully and fairly paid when they've given back half
of what they received.

Even though they are capable of working out that 3/8 is more
literally "fair", they will in practice not look at it that way. I
have met plenty of people who have difficulty understanding why 3/8
is a 50-50 split.

This way, A gets a total of $6, with an expected success rate close
to 100%. Over repeated trials, Nash's 9 would have to be successful
67% of the time to be as good as my 2. IIRC, in practice, no-one
manages close to a 67% success rate with 9?

But then, my economist friends are always telling me how easily and
frequently economic theories fail in real-life.

I also thought - as an ill-informed layman - that Nash had predicted
something like 2 too, i.e. something more cunning and less
trivial. I guess I must have got mixed up with later theories (IIRC
"game theory" has lost its lustre in many circles now?)

Adam M
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