Solving the reality game

On the Freakonomics blog, a call to arms in solving for the Nash equilibrium of the Beauty and the Geek game. Basically, there is a bit of game theory all over it because you have the ability to pit two of your competing teams against each other for elimination. The question is: who should you send? The answer is, of course, simple: the two teams who are most likely to score well. You might be worried about retribution but in that case it will be a strong team doing the retribution and you won’t be competing against them in future elimination rounds. The hard part is predicting whether this will be a balanced team or one where one of the members is particularly strong.

Passing thoughts

Ian Ayres comments on the dilemma when lanes merge of moving over early (and watching others zoom pass you) or standing your ground (but causing more congestion). He and Barry Nalebuff never published but thought about a possible solution:

Since neither approach is satisfactory, we should look for a better answer. By this point it should be second nature to see that the problem is one of poor incentives. People who jump the queue don’t care sufficiently about how jumping slows down the other drivers.

Is there a way to prevent people from engaging in this behavior? Indeed there is — quite literally. Why not neither move over nor pass, but simply track the speed of the slower moving right lane? You can block people from passing you without taking advantage of the people who are already moved over. The drivers in the right lane understand how you’ve helped them and always gratefully let you in at the end.

Try it, it works. We know; we’ve done it. The only people who lose are the ones who wanted to jump the queue — but they are usually too self conscientious about their intentions to honk (or pull out a gun).

Is it me or isn’t this the norm on Melbourne highways? This is pretty much what I do for merging lanes every morning. I guess if someone got hold of the freeway camera feeds you might actually be able to measure this.

Coase and bidding for classes

In a surprising post, Steve Levitt comes out in favour of a lottery allocation for classes with permissive re-sale. Apparently, this is what happens at NYU’s law school but I must say that I have little confidence that the so-called efficient outcomes are resulting from the post-lottery trading. For one, bilateral trades in a quick and hasty manner cannot be expected to allow those who most want to attend a particular class to get the opportunity to do so. Second, there is plenty of psychological evidence that there is a ‘bird in the hand’ effect to such things and having won a lottery many might not be as willing to part with their allocation. It is fair in the sense that everyone has an equal chance of earning rents but efficiency cannot be guaranteed.

A better solution is an auction mechanism rather than a lottery. Levitt argues that the Coase-like trading situation helps law students learn about the Coase Theorem. But wouldn’t it be better that they learn about efficiency per se through an appropriate mechanism upfront?

Charity and eBay

The Parentonomics 1st Copy auction is over and I am very pleased with the result; the winning bid was very flattering A$1,001.55. I’ll post more over at Game Theorist when I have spoken to the winner. For now I thought I’d graph what I learned about demand. Turns out that so long as there are at least 33 buyers of the book at its retail price, it will do better at that price than at $1,000. Of course, that high price was most likely a result of the ‘charity’ aspect of this auction. Who knows? It could be an asset.

But I did learn something about all of that. First, eBay is not the place for such things. For starters, there is no opportunity for jump bidding as eBay automates the bids. So there may have been someone who wanted to denate $2,000 but unless there were two, they would be better off doing outside of the auction. Second, because eBay requires PayPal as an option in Australia, once it is there it is used. So that cost me an extra $20. Not that I am complaining about all of that. I am just saying that perhaps the sellers griping about eBay Australia’s tactics have a point.

Imagine there’s no …

I have just finished reading Richard Dawkins’ latest book, The God Delusion. I have long had an affinity with Dawkins’ work. The Selfish Gene stands out. There, Dawkins outlined how evolutionary science had evolved, in particular, to be solidly grounded in the roots of game theory. That book was, in fact, my first real introduction to game theory and what it could do. Continue reading “Imagine there’s no …”

Doing others’ bidding

This weekend I bought a house. Not for me, mind you but for some family members. Basically, I became a buyer’s agent. Continue reading “Doing others’ bidding”

Nalebuffcast

Yale Professor Barry Nalebuff has a podcast of one of his lectures on creative thinking. Click here for the iTunes link. It is a thoughtful and often funny talk.

[Update: there is a link to a video version here]