Game Reality

The Fox TV Network announced today yet another reality series. They all have their twists but this one’s quite interesting. Nine contestants will be locked in a bunker. They will be asked to vote which of them should receive $1.5m. If they ‘can’t decide,’ the amount they could win would be reduced and they will remain in the bunker to vote again the following week. However, as is typical of these things, one contestant will be ‘removed’ from contention each week but will still be able to vote. The interesting thing is that it is possible that the series could last anywhere from one to eight episodes.

The name of the show is ‘Unan1mous’ so we can presume the vote for the winner needs to be unanimous. It will be interesting to see if contestants will be able to vote for themselves. Either way it will be interesting. I am going to refrain from predicting what will happen here until we get a better sense of the rules (tune back in March) but it should be clear to all that the basic set-up here is akin to the Prisoners’ Dilemma: in order to generate the maximum prize, all but one individual will have to sacrifice winning anything at all. This is usually a recipe for social disaster and I am pretty sure that is what Fox is banking on. Even better, the bigger the disaster, the cheaper the program is to produce.

Experimental economists go to alot of trouble to conduct experiments that test the predictions of game theory. But reality television is offering a new dimension to all of this with much higher stakes. In an earlier era, Scientific American offered its own slice of reality. Formulated by Douglas Hofstadter, in June 1983, Scientific American made the following (seemingly extraordinary) offer:

This talk of holding back in the face of strong temptation brings me to the climax of this column: the announcement of a Luring Lottery open to all readers and nonreaders of Scientific American. The prize of this lottery is $ 1,000,000/N, where N is the number of entries submitted. Just think: if you are the only entrant (and if you submit only one entry), a cool million is yours! Perhaps, though, you doubt this will come about. It does seem a trifle iffy. If you’d like to increase your chances of winning, you are encouraged to send in multiple entries without limit. Just send in one postcard per entry. If you send in 100 entries, you’ll have 100 times the chance of some poor slob who sends in just one. Come to think of it, why should you have to send in multiple entries separately? Just send one postcard with your name and address and a positive integer (telling how many entries you’re making) to:

Luring Lottery c/o
Scientific American……

You will be given the same chance of winning as if you had sent in that number of postcards with ‘1′ written on them. Illegible, incoherent, ill-specified, or incomprehensible entries will be disqualified. Only entries received by 5:00 PM on June 30, 1983 will be considered. Good luck to you (but certainly not to any other reader of this column)!”

Well, what happened? It turned out that the vast majority of people in the world sacrificed for the common good and did not subit a ‘claim.’ However, a few thousand others did including one person for a googol entries (that is, 10 to the power of 100 or what Google would have been called if their founders could spell). So there was no chance of Scientific American paying out.

Given this, it is a wonder why Fox didn’t make this more interesting: say $10m or $100m or even a googol million! But how much faith you one put in game theory translating into reality.

For any of my students out there, one thing you can be sure of: I am going to find a way for this to be on the exam.

Important parallels (or Survivor-off-demand)

The season premiere of Survivor: Panama began in the US on Friday. It will be shown here but as usual it is unclear when. And, as usual, it will be with enough lag that those of us using the Internet will have to keep off to avoid knowing who won.

CBS — the US owner and broadcaster of Survivor — are offering two non-free to air TV means of watching Survivor. First, it is available at Google’s new video store. Second, it is available from CBS’s own web-site as an ‘on demand’ option (viewable for 24 hours after downloading). Each will cost US$1.99. And each can be played on any Window’s based PC. Moreover, they were available only a few hours after broadcast (in time for an evening showing here) and ad-free.

But, just as in Apple’s iTunes Music Store, both sites restrict purchases to the US only. Actually, for Google the check is an IP address and so you must actually be in the US. For CBS, a US credit card address appears sufficient.

The question is why? And the answer is easy — because presumably CBS has done deals with local broadcasters that give them exclusivity (for some period of time) or at least until they are broadcast locally. Although there are indications the restrictions may be indefinite. (For example, old episodes of Star Trek available on Google are restricted to the US; long after broadcast and DVD availability everywhere).

But that is only half the answer. From an economics perspective, a channel of distribution should only be shut down by a producer if it is inefficient. Downloads are not inefficient and offer improvements in quality to some. So we have to ask ourselves: would the amount of revenue (in advertising) that a local broadcaster (such as Channel 9) loses from downloads available elsewhere exceed those that CBS could gain from making those downloads widely available? With regard to local affiliates in the US, CBS has decided that the answer is no. Why would the answer be different for Australia?

Moreover, it is unclear to me (although, I am not a lawyer) why such a restriction does not violate our parallel importing laws. After all, no local broadcaster could prevent DVDs of Survivor from being brought to and sold in Australia by an importer but what about downloads that compete with local broadcasts? There appears to be an import(ant) parallel here (pun intended!).