You are currently browsing jeff’s articles.
- LP trick shots.
- Faces of people getting blown.
- “The American, whom later we were to learn to know and love as the Gin Bottle King, because of a great feat of arms performed at an early hour of the morning with a container of Mr. Gordon’s celebrated product as his sole weapon in one of the four most dangerous situations I have ever seen, said: “The show’s going to begin.”
- Opening a beer bottle with a chainsaw.
Oh, dear me, how unspeakably funny and owlishly idiotic and grotesque was that “plagiarism” farce! As if there was much of anything in any human utterance, oral or written, except plagiarism! The kernel, the soul—let us go further and say the substance, the bulk, the actual and valuable material of all human utterances—is plagiarism. For substantially all ideas are second-hand, consciously and unconsciously drawn from a million outside sources, and daily use by the garnerer with a pride and satisfaction born of the superstition that he originated them; whereas there is not a rag of originality about them anywhere except the little discoloration they get from his mental and moral calibre and his temperament, and which is revealed in characteristics of phrasing.
From the wonderful Letters of Note.
From Tyler Cowen:
Any Martian visiting the economics blogosphere, …, could tell you that most of micro is a more or less manageable topic, whereas macro induces economists to start thinking of each other as idiots and fools.
Kidney exchanges have saved many lives since economists Al Roth, Tayfun Sonmez, Utku Unver, and Atila Abdulkadiroglu first proposed them and then convinced doctors and hospitals to embrace them.
In paired kidney exchanges the transaction involves multiple pairs of patients. Each pair consists of a kidney patient who will receive a kidney, and a donor, typically a family member, who will give one. Each pair is incompatible: because of a blood-type or tissue-type mismatch the patient would reject the donor’s kidney. The exchange works by creating a cycle of patients and donors who are compatible. For example, patient A’s wife donates her kidney to patient B whose husband donates his kidney back to patient A. Even longer cycles are possible.
As a rule all of the transplantation operations in any paired exchange are carried out simultaneously and in the same hospital. This acts as a guarantee to each donor that they will give their kidney if and only if their loved one also receives one. If some donor along the cycle becomes ill or gets cold feet, the entire cycle is halted before it begins. Such a guarantee surely makes patients more willing to participate in the exchange but it also limits the size of the cycle since there is a limit to the number of surgeries that any one hospital can support.
Then there are the chain exchanges. Here, without any paired patient to receive a kidney in return, a good samaritan comes forth and offers to donate his kidney to any compatible stranger. This good samaritan is going to save somebody’s life. And through the power of exchange, possibly many more than just one life. Because instead of just an arbitrary compatible recipient, the kidney can be given to a patient paired with a donor whose kidney is compatible with another patient paired with a donor whose kidney is compatible with… That is, the good samaritan can activate a long chain of transplants that otherwise could not be completed by paired exchange because the chain of compatibility did not cycle back to its beginning.
The kidney exchange economists noticed a subtle difference between paired and chain exchanges. And based on their observation they convinced doctors to relax the rule on simultaneous surgeries in the case of chain exchanges. The ever-increasing record length chains of kidney transplants are only possible because of this.
Why were doctors willing to do sequential surgeries for chained exchanges while they insisted on simultaneity for paired exchanges? It’s not because they have any less concern that the chain would be broken before all patients receive their promised kidneys. It’s not because extending the size of a cycle is any less of a blessing than extending the length of a chain. The difference that the economists noticed can be boiled down to an esoteric concept known to mechanism designers as individual rationality.
When a paired exchange cycle is broken because one surgery along the line is not carried out, one patient is necessarily made worse off than he would have been if the exchange had never happened. Because that patient’s loved one has given her kidney and not only has the patient not received any kidney in return, but his donor no longer has a kidney to give. The patient has lost bargaining power in the kidney exchange market going forward. The anticipation of this possibility would make patients and donors reluctant to participate in an exchange in the first instance.
By contrast, when the sequence of transplants in a chain is halted, every patient-donor pair who gave their kidney to the next patient downstream in the chain already received one from the previous upstream donor. Yes the patients at the end of the chain do not receive their promised kidneys but they are no worse off than if the chain had never been planned in the first place. Without any threat to individual rationality there is no reason not to extend the chain of surgeries as long as imaginable capitalizing on the original good samaritan’s altruism as much as compatibility allows.
Tayfun Sonmez is here at Northwestern giving a mini-course on market design, here are his lecture slides including a lecture on kidney exchange.
The politics of not funding Political Science:
By a vote of 218-208, the House Wednesday night backed an amendment that would bar the NSF from spending any of its 2013 funds on its political science program, which allocated about $11 million in peer-reviewed grants this year. Explaining the amendment on the House floor Wednesday evening, Flake said that given his colleagues’ reluctance to slash the agency’s overall budget — the House defeated his earlier amendment by a vote of 291 to 121 — Congress should ensure, “at the least, that the NSF does not waste taxpayer dollars on a meritless program.”
In hunting for programs that the government should not spend its precious dollars on, Flake said, “I can think of few finer examples to cut than the National Science Foundation’s Political Science Program.”
Here’s a list of apparently less fine examples that will live on:
I remember the first time I saw a session at a conference under the heading of Neuroeconomics. I thought it was some kind of joke. Well it certainly wasn’t a joke, it has turned out to be a big deal, bringing a new kind of data to economics. Genetic data is the next new kind of data and Genoeconomics is the newest non-joke.
Koellinger didn’t see it that way. Four year later, he is part of a group of young economists saying it’s time for their field to jump into the gene pool with both feet. In a series of papers, including one forthcoming in the Annual Review of Economics and another in the Proceedings of the National Academy of Sciences, Koellinger, along with a team headed by Cornell economist Daniel Benjamin, David Laibson and Edward Glaeser from Harvard, Union College psychologist Christopher Chabris, Cesarini, and others, is heralding the arrival of a new discipline—“genoeconomics.” They say economists are missing something important by ignoring the genetics underlying things like risk-taking, patience, and generosity. If we could grasp how our genes influenced such economic traits, they argue, the knowledge could be transformative.
I saw David Cesarini last week present an introduction to Genoeconomics. From what I can tell Genoeconomics has made one major contribution already: demonstrating that so far there is no reliable statistical correlation between genes and economic behavior. The picture I got was some kind of Gresham’s law for p-values. Because there are so many genes, there is vast scope for data mining and so journals are insisting on significance levels of 1 – 10^{-some god awful exponent}.
Check this out. Five numbers appear on a screen in different locations. They remain visible for 210 milliseconds and then they are obscured. The subject must then touch the locations in increasing order of the numbers that appeared there. That’s pretty much impossible. Here’s a human subject who is highly trained and does an impressive job but still fails miserably.
Now check out how nonchalantly this chimpanzee does it.
I didn’t even know they could count. Note that the 5 numbers are random integers between 1 and 9. So the chimp is processing a binary relation in short-term memory, not to mention reading at a super-human rate. There are more videos here. I saw these at Colin Camerer’s talk last week at Arthur Robson‘s conference on the Biological Basis of Preferences.
How much do your eyes betray you?
Have two subjects play matching pennies. They will face each other but separated by a one-way mirror. Only one subject will be able to see the other’s face. He can only see the face, not anything below the chin.
Each subject selects his action by touching a screen. Touch the screen to the West to play Heads, touch the screen on the East to play Tails. (East-West rather than left-right so that my Tails screen is on the same side as your Tails screen. This makes it easier to keep track.)
You have to touch a lighted region of the screen in order to have your move registered and the lighted region is moving around the screen. This is going to require you to look at the screen you want to touch. But you can look in one direction and then the other and touch only the screen you want. Your hands are not visible to the other subject.
How much more money is earned by the player who can see the other’s eyes?
(Conversation with Adriana Lleras-Muney)
Microsoft Research will open a lab in New York City.
The research community is highly connected, so we’re well aware of and have long admired the incredible work being done by the researchers we are welcoming to Microsoft Research, including thought leaders such as Duncan Watts, David Pennock, and John Langford. But as we in Microsoft Research connected with them to begin a meaningful dialogue about their plans and aspirations, we began to fully appreciate not only their individual talents and expertise, but also their uncanny ability to work together with unrivaled energy and passion. The conversations left me and other Microsoft Research researchers inspired to expand our East Coast presence. I’m thrilled to share that David Pennock will take the reins as MSR-NYC’s assistant managing director, overseeing the day-to-day operations at the NYC facility.
I’m excited as well for the collaboration opportunities between the research interests of this phenomenally talented team in NYC and the work being done by my team in the New England lab around social media, empirical economics, and machine learning. The approaches of the two labs to social science and economics research are distinct but highly complementary, and, indeed, we expect that the whole will be much greater than the sum of its parts.
I spent a week last fall at MSR Cambridge and it was one of the most pleasant and productive weeks I have had in a long time. If they can recreate the same environment in Manhattan it would be an incredibly attractive place for visitors and full-time scholars. Here’s more.
Over the weekend I attended a conference at the University of Chicago on The Biological Basis of Preferences and Behavior, and Balazs Szentes stole the show with a new theory of the peacock’s tail. In Balazs’ theory a world without large and colorful peacock plumage is simply not stable.
A large tail is an evolutionary disadvantage: it serves no useful purpose and it slows down the male and makes him conspicuous to predators. So why do genes for large tails appear and take over the population of male peacocks? Balazs’ answer is based on matching frictions in the peacock mating market. Suppose female peacocks choose which type of male peacock to mate with: small or large tails. Once the females sort themselves across these two separate markets, the peacocks are matched and they mate.
The female peacocks are differentiated by health, and within a peacock couple health partially compensates for the disadvantageous tail. In the model this means that healthy females who mate with big-tailed peacocks will produce almost as many surviving offspring as they would if they mated with peacocks without the disadvantage of the tail.
This substitution between the characteristics of female and male peacocks creates a selection effect in the mating market. Consider what happens when a small-tailed peacock population is invaded by a mutation which gives some male peacocks large tails. Since female peacocks make up half the population of peacocks there is now an imbalance in the market for small-tailed peacocks. In particular the males are in excess demand and some females will have trouble finding a mate.
On the other hand the big-tailed male peacocks are there for the taking and its going to be the healthy female peacocks who will have the greatest incentive to switch to the market for big tail. The small cost they pay in terms of reduced quantity of offspring will be offset by their increased chance of mating. The big tails have successfully invaded.
Once they have taken over the population (Balasz shows that under his conditions there is no equilibrium with two kinds of male peacocks) he same selection effect prevents small tails from invading. When a small-tail mutation appears all the females will want to mate with them. The market for small tail gets flooded with eager females up to the point where some of them are going to have a hard time finding a mate. Given this, each female must decide whether to take a gamble and try to mate with the small-tail male or have a sure chance of mating with a large tail.
The unhealthy females are going to be the ones who are most willing to take the risk because they are the least compatible with the large-tail males. This means that the small-tail mutants can only mate with unhealthy females and (under the conditions Balazs identifies) this more than offsets their advantage, they produce fewer offspring than the large-tails and they are driven out of the population.
The human eye color blue reflects a simple, predictable, and reliable genetic mechanism of inheritance. Blue-eyed individuals represent a unique condition, as in their case there is always direct concordance between the genotype and phenotype. On the other hand, heterozygous brown-eyed individuals carry an allele that is not concor- dant with the observed eye color. Hence, eye color can provide a highly visible and salient cue to the child’s heredity. If men choose women with characteristics that promote the assurance of paternity, then blue-eyed men should prefer and feel more attracted towards women with blue eyes.
This calls for an experiment.
The eye color in the photographs of each model was manipulated so that a same face would be shown with either the natural eye color (e.g., blue) or with the other color (e.g., brown). Both blue-eyed and brown-eyed female participants showed no difference in their attractiveness ratings for male models of either eye color. Similarly, brown-eyed men showed no preference for either blue-eyed or brown-eyed female models. However, blue-eyed men rated as more attractive the blue-eyed women than the brown-eyed ones. We interpret the latter preference in terms of specific mate selective choice of blue-eyed men, reflecting strategies for reducing paternity uncertainty.
The first ever MD to specialize in the treatment of hangovers.
Earlier this month, he unveiled his new treatment clinic, a 45-foot-long tour bus emblazoned with soothing blue and white graphics and his business’s name, “Hangover Heaven.” Inside the bus, it looks like a cross between an ambulance and a conference room at Embassy Suites. IV drips hang from the ceiling, patients are swathed in blankets, but there are also spacious leather sofas with built-in beverage-holders and flat-screen TVs. EMTs administer relief to patients in the form of branded medical cocktails. The $90 Redemption package contains one bag of saline solution, vitamins, and an anti-nausea medication. The $150 Salvation package includes a double shot of saline solution, the vitamins, the anti-nausea medication and an anti-inflammatory as well.
They don’t take insurance. For some reason I am blanking on whom to thank for the link but I have a feeling it’s Courtney Conklin Knapp.
A week-long series of blog posts at NPR the best of which come from Jeremy Denk. His opener:
Preternaturally happy, cheerful, perfect, organized, clean, boring, popular: I guess the case I’m making is that the Goldbergs are the Martha Stewart of Variations. And like Martha Stewart, you don’t totally absolutely mind if they end up going off for a little while to a very clean and nice prison (sorry Martha, I’m just following the metaphor, I don’t really mean it) so you don’t have to see them being perfectly organized all the time, making a mockery of your unclean life. Maybe a show of hands: who would like a short moratorium on performances or recordings of the Goldbergs, so we could all hear it freshly again? Who will be the first pianist to unilaterally disarm? (Not me!)
Let’s revise the Martha Stewart metaphor. The Goldbergs are like a friend you have who always does everything right. This friend always answers his emails, keeps a clean house, has a kind word for everyone, behaves properly at concerts, writes thank you cards, grooms himself assiduously, knows how to tie a tie, never eats Burger King at 2 AM, and never ever writes silly blog posts saying he hates pieces he really loves. He’s an example to the world. He’s smiling at you over drinks, listening as always with benevolent patience, and you realize through your gritted hateful envious teeth that he is certainly not your enemy, and what would it hurt to admit, you wouldn’t want to face life without him?
Jaapi jab: DoTheMath.
My brother-in-law wanted to sell something with an auction but first he wanted to assemble as many interested buyers as he could. His problem is that while he knew there were many interested buyers in the world he didn’t know who they were or how to find them. But he had a good idea: people who are interested in his product probably know other people who are also interested. He asked me for advice on how to use finders’ fees to incentivize the buyers he already know about to introduce him to any new potential buyers they know.
This is a very interesting problem because it interacts two different incentive issues. First, to get someone to refer you to someone they know you have to confront a traditional bilateral monopoly problem. You are a monopoly seller of your product but your referrer is a monopoly provider of access to his friend because only he knows which and how many of his friends are interested. If your finder’s fee is going to work it’s going to have to give him his monopoly rents.
The interesting twist is that your referrer has an especially strong incentive not to give you any references. Because anybody he introduces to you is just going to wind up being competition for him in the auction for your product. So your finder’s fee has to be even more generous in order to compensate your referrer for the inevitable reduction in the consumer’s surplus he was expecting from the auction.
I told my brother-in-law not to use finder’s fees. That can’t be the optimal way to solve his problem. Because there is another instrument he has at his disposal which must be the more efficient way to deal with this compound incentive problem.
Here’s the problem with finder’s fees. Every dollar of encouragement I give to my buyers is going to cost me a full dollar. But I have a way to give him a dollar’s worth of encouragement at a cost to me of strictly less than a dollar. I leverage my monopoly power and I use the object I am selling as the carrot.
In fact there is a basic principle here which explains not only why finder’s fees are bad incentive devices but also why employers give compensation in the form of employee discounts, why airlines use frequent flier miles as kickbacks and why a retailer would always prefer to give you store credit rather than cash refunds. It costs them less than a dollar to provide you with a dollar’s value.
Why is that? Because any agent with market power inefficiently under-provides his product. By setting high prices, he creates a wedge between his cost of supplying the good and your value for receiving it. If he wants to do you a favor he could either give you cash or he could give you the cash value in product. It’s always cheaper to do the latter.
So what does this say about incentivizing referrals to an auction? How do you “use the object” in place of a finder’s fee? The optimal way to do that is the following. You tell your potential referrer that you will give him an advantage in the auction if he brings to you a new potential buyer. Because you are a monopoly auctioneer there is always a wedge that you can capitalize on to do this at minimal cost to yourself.
In this particular example the wedge is your reserve price. Your referrer knows that you are going to extract your profits by setting a high reserve price and thereby committing not to sell the object if he is not willing to pay at least that much. You will induce your referrer to bring in new competition by offering to lower his reserve price when he does.
Now of course you have to deal with the problem of collusion and shills. Of course that’s a problem in any auction and even more of a problem with monetary finder’s fees but that’s a whole nuther post.
(Ongoing collaboration with Ahmad Peivandi)
Skip ahead to about 13:00. It seems a little too neatly staged but it’s still hilarious.
Hardee heave: Emil Temnyalov
Act as if you have log utility and with probability 1 your wealth will converge to infinity.
Sergiu Hart presented this paper at Northwestern last week. Suppose you are going to be presented an infinite sequence of gambles. Each has positive expected return but also a positive probability of a loss. You have to decide which gambles to accept and which gambles to reject. You can also invest purchase fractions of gambles: exposing yourself to some share 
Here is a simple investment strategy that guarantees infinite wealth. First, for every gamble 
Next, when your wealth level is actually 
If you follow this rule then no matter what sequence of gambles appears you will never go bankrupt and your wealth will converge to infinity. What’s more, this is in some sense the most aggressive investment strategy you can take without running the risk of going bankrupt. Foster and Hart show that any investor that is willing to accept some gambles
Subjects video chat with each other. In one treatment subject A sees her own image in a small window in the corner of the chat, and in the other treatment (the control) there is no small window and she sees only the chat partner.
Subject B is not told about the two treatments and is simply asked to report how attractive subject A is. We want to know whether attractiveness is higher in the self-image treatment versus the control treatment.
This gets at a few different issues but the one I am curious about is this: do people know what it is about them that makes them attractive to others?
Also, we would want to track eye movements during the chat.
From The Chronicle of Higher Education
If you’re a psychologist, the news has to make you a little nervous—particularly if you’re a psychologist who published an article in 2008 in any of these three journals:Psychological Science, the Journal of Personality and Social Psychology,or the Journal of Experimental Psychology: Learning, Memory, and Cognition.
Because, if you did, someone is going to check your work. A group of researchers have already begun what they’ve dubbed the Reproducibility Project, which aims to replicate every study from those three journals for that one year. The project is part of Open Science Framework, a group interested in scientific values, and its stated mission is to “estimate the reproducibility of a sample of studies from the scientific literature.” This is a more polite way of saying “We want to see how much of what gets published turns out to be bunk.”
We should do this in economics. But there is a less confrontational way to do it. Top departments in experimental economics attract PhD students who want hands on experience in the lab. These are departments like NYU and CalTech. They would benefit the profession, their students, and the reputation of their PhD programs, i.e. everybody concerned, if they were to add as a requirement that every student receiving a PhD must pick one recently published experimental article and attempt to replicate it.
Thanks to Josh Gans for the pointer.
A limited time deal on South Africa’s Kulula airlines in celebration of President Jacob Zuma’s recent wedding:
Inspired by regular VIP travellers with sizeable spousal entourages, the offer is open to all fourth wives when the family travels together on the Jo’burg to Cape Town route.
There are of course some peskys Tees and Cees to go with our less than pesky offer:
- The offer is valid on Joburg to Cape Town route from Monday 23rd April ‘til April 30th
- The family must have already bought a kulula.com ticket for all wives and husband
- Simply present ticket and proof of marriage and ID at kulula counter before departure
- A refund will then be made on the fourth wife’s ticket.
- Happy happy
Kufi carom: Toomas Hinnosaar
Here are the paths between me and Lones Smith. Some other numbers:
- My Erdos number is 4
- My Ken Arrow number is 5
- My Tyler Cowen number is 4. (I am not sure I believe all of these paths but some of them are true and interesting.)
- My Barack Hussein Obama number is 4 and the shortest path goes through Hilary Clinton.
- It can happen that the sensory input you experience over a short interval of time makes no sense to your brain until some last thing happens which reveals the theme and gives context to everything that came before. At that moment your brain goes back and reprocesses everything that just happened in order to make sense of it. The feeling is like experiencing a whole chunk of time condensed into one moment together with the satisfying feeling of resolution that comes from making order out of chaos. Musicians use this trick to great effect.
- It’s less of an insult to say someone is “disingenuous” than to say she is a liar. But we all know that the meaning is exactly the same. Disingenuous is a more obscure word and there is less common knowledge of its meaning. Given two words that are synonymous is it generally true that the one with the more nuanced connotation is also the one that is longer, rarer, more obscure?
- In almost all Western music every note begins and ends K/2^n units of time after the last note for some integers K and n. Isn’t that rather limiting?
- A nurse at my kids’ pediatrician tells them she will count to three before giving them a shot but she actually gives the shot at the count of 2, surprising them. It seems to make it less painful. How does that work?
Airlines are using ever more sophisticated pricing strategies, sports teams and theaters are adopting dynamic pricing, even restaurants are using auctions to allocate scarce seating space. And the usual perception of this is that the consumer is being gouged. Auctions leverage competition among buyers and this drives the price up. Sellers are raising profits by eroding consumer surplus.
But as a counterpoint to this, here is a mostly unnoticed but fundamental principle of auction-like pricing schemes: they lead to unambiguously lower prices at the margin even when, indeed especially when, the seller is a coldhearted profit maximizer.
Suppose a theater allocates seats by selling tickets. And suppose they do it the old-fashined way: they set a price for tickets and put them up for sale until they sell out. Setting the right ticket price is a tricky problem because a price is a one-dimensional instrument that has to solve a two-sided problem. On the one hand, you want high prices in order to capture revenue when demand turns out to be strong. But on the other hand, you want low prices in order to ensure the theater isn’t empty when demand is weak. A price is simply too limited an instrument to do that double duty. It’s no wonder that there are so many empty seats on most days while on other days the show sells out way in advance.
An auction (or dynamic pricing or many other pricing systems) has built into it two separate mechanisms for handling those two separate problems. First there is the mechanism that leverages competition. When demand is strong buyers must compete with one another for limited space. When that happens the price is being set not by the seller but by the buyers themselves. A buyer wins a seat only if he is prepared to pay a price larger than the next most aggressive bidder.
The unsung virtue of the competition-leveraging aspect of auctions is that it relieves the other mechanism in an auction, the seller’s (reserve) price, of the burden of capturing revenue at the high-end of the market and allows the seller to use it for a single purpose: to capture revenue when demand is low. And this necessarily leads the seller to reduce his reserve price below the price he would have set if he were just using prices and not auctions.
The reason follows from a simple marginal trade-off. Think of what happens to the seller’s profit when he lowers his price a little. There are gains and losses. The gain is that the lower price leads to greater tickets sales when demand turns out to be low. The loss is that when demand is already high enough to sell out at the original price he will sell the same number of tickets but at a lower price. The seller’s optimal price is chosen to balance these gains and losses.
But with an auction the trade-off changes because the reserve price plays no role in determining revenues when demand is high. That’s when the buyers are setting their own prices. Cutting reserve prices leads to all the same gains but strictly lower losses compared to cutting plain-old prices.
The upshot of this is that the winners and losers from an auction system aren’t who you think. Auctions don’t favor the deep-pocketed compared to the small guys. Exactly the opposite. The marginal consumer is priced out of the market when a seller eschews an auction because then he must keep prices high. When a seller switches to an auction he lowers his reserve price and now the marginal consumer has a chance to buy at those low prices.
Helpful conversation with Toomas Hinnosaar acknowledged.
(Drawing: I Persuade With Carrots from www.f1me.net)
Twitter users turned Sunday’s French presidential election into a battle between a green Hungarian wine and a red Dutch cheese in a bid to get round tough laws banning result predictions.
The #RadioLondres hashtag was the top France trend on Twitter during the first-round presidential vote, in homage to World War II codes broadcast to Resistance fighters in Nazi-occupied France from the BBC in London.
But French citizens have written a new codebook in a subversive bid to get round laws that mean anyone announcing vote predictions before polls closed at 8:00 pm (1800 GMT) could be fined up to 75,000 euros (100,000 dollars).
“Tune in to #RadioLondres so as not to know the figures we don’t want to know before 8:00 pm,” said one ironic tweet.
“Dutch cheese at 27 euros, Tokai wine at 25 euros,” read one tweet as poll percentage predictions were published abroad.
The thing is, this would still be prosecuted if perpetrated by broadcast media. So it wasn’t the code per se that allowed them to circumvent the law. So the questions are:
- Why is an in-spirit violation not prosecuted when carried out in a decentralized communication network?
- Would just nakedly forecasting the outcome also escape prosecution if done on Twitter? (As opposed to the usual things people nakedly do on Twitter.)
The pointer was from @handeh.
Everybody is reacting to the Golden Balls video that I and others have posted. They are saying that the Split or Steal game has been solved. I am not so sure.
- First of all I would like to point out that this solution was suggested here in the comments the first time I (or anybody else I believe) linked to Golden Balls in April 2009. Florian Herold and Mike Hunter wrote: “Perhaps a better strategy would be to tell your opponent that you are going to pick steal no matter what, and then offer to split the money after the show. Pointing out that your offer constitutes a legally binding oral contract, which has been taped, and viewed by hundreds of thousands of witnesses. That way your opponent can opt to pick split, and half the money with you. Or defect in which case you both get nothing.”
- Also, Greg Taylor has a good analysis in the comments to Friday’s post.
- But the successful application of the idea in the most recent video ironically shows the flaw in their reasoning. Consider the player who receives the proposal and is suggested to play split. This is the player on the left in the video. He should ask himself whether he believes that the proposing player will actually play Steal. Florian, Mike, and the rest of the Internet make the observation that Steal is a dominant strategy and therefore a promise to play Steal is credible. But Steal is a dominant strategy for a player with the standard payoffs and the guy who makes this proposal has revealed that he does not have the standard payoffs.
- Now you may respond by saying that the proposal to play (Split, Steal) and divide the winnings at the end is in fact a selfish proposal as it avoids the inevitable (Steal, Steal) outcome. So, you say that the proposer is in fact confirming that he has the standard payoffs and therefore that Steal is a dominant strategy and his promise is credible.
- But let’s look more closely. If he intends to carry out his proposal then he expects to end up with half of the winnings. Indeed he expects to have the full check given to him and either because of altruism, fairness, or reputational incentives to prefer to hand over half of it to the opponent. As he sits there with the balls in his hand and the expectation of this eventual outcome, he can’t avoid concluding that the cheapest way to bring about that outcome is to instead just play Split right now and allow the producers of the show to enforce the agreement.
- Given this the player who is considering this proposal should not believe it. He should believe that the proposer is too nice to carry out his nice proposal. A selfish player faced with this proposal should play Steal because he should expect the proposer to play Split.
- Having dispensed with this try, my personal favorite solution is the one proposed by Evan and elaborated by Emil in which the two men commit to randomize by picking each others’ balls.
- In any case, this video is an essential companion to the original for any undergraduate game theory course.
- Finally, does this Golden Balls show actually exist? In the present? How long ago did this happen? Or is this just some kind of Truman Show like experiment you are all subjecting me to?
The Golden Balls strategy we have been waiting for.
Boonie bobble: Emil Temnyalov
Funded by the U.S. Department of Health and Human Services, a panel of experts in psychology and economics, including Nobel laureate Daniel Kahneman, began convening in December to try to define reliable measures of “subjective well-being.” If successful, these could become official statistics.
Alan Krueger, Angus Deaton and Justin Wolfers have cameos in the article.
In Britain, Prime Minister David Cameron has embraced the idea, and last year the government began asking survey respondents things like “Overall, how happy did you feel yesterday?” and “Overall, how satisfied are you with your life nowadays?” The U.K. Economic and Social Research Council is also funding the U.S. panel’s $370,000 budget. In France, President Nicolas Sarkozy in 2008 launched a commission including two Nobel winners, Joseph Stiglitz and Amartya Sen, which opined that the “time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people’s well-being.”
Far ahead in such measures, however, is the tiny Himalayan kingdom of Bhutan, which has embraced the notion of “Gross National Happiness” as a national goal and has created a commission to achieve it.
You poor sap. I know you won’t believe any of this, but you should. How can I get it through your thick, acne-pocked skull? All the stupid things you are so worried about really aren’t very important at all. In fact, they are the opposite of important. What if I told you that all the “winners” around you right now were actually the losers? Well, I just did tell you that, but you still don’t believe me because I’m an adult and 16 year olds can never trust adults.
What if I tried to explain it this way: That feeling you’ve never been able to put a name on — it feels something like, let’s say, a bone-crushing insecurity and cluelessness about your place in the world — just forget about it! That’s right. You can forget about it and go about your days — confident with the knowledge that it’s all going to work out just fine.
Could it be that this kind of confidence would just turn his 16 year old self into one of the winners who will eventually turn out to be a loser? Isn’t that kind of confidence exactly what separates the winners in high school from the losers? And what else but insecurity and cluelessness about your place in the world leads a 16 year old to give up on the present and try to explore ways of being that might one day give him real self-confidence and not just the artificially, socially propped-up kind?
Drawing: Follow Your Heart from www.f1me.net
Suppose you and I are playing a series of squash matches and we are playing best 2 out of 3. If I win the first match I have an advantage for two reasons. First is the obvious direct reason that I am only one match short of wrapping up the series while you need to win the next two. Second is the more subtle strategic reason, the discouragement effect. If I fight hard to win the next match my reward is that my job is done for the day, I can rest and of course bask in the glow of victory. As for you, your effort to win the second match is rewarded by even more hard work to do in the third match.
Because you are behind, you have less incentive than me to win the second match and so you are not going to fight as hard to win it. This is the discouragement effect. Many people are skeptical that it has any measurable effect on real competition. Well I found a new paper that demonstrates an interesting new empirical implication that could be used to test it.
Go back to our squash match and now lets suppose instead that it’s a team competition. We have three players on our teams and we will match them up according to strength and play a best two out of three team competition. Same competition as before but now each subsequent game is played by a different pair of players.
A new paper by Fu, Lu, and Pan called “Team Contests With Multiple Pairwise Battles” analyzes this kind of competition and shows that they exhibit no discouragement effect. The intuition is straightforward: if I win the second match, the additional effort that would have to be spent to win the third match will be spent not by me, but by my teammate. I internalize the benefits of winning because it increases the chance that my team wins the overall series but I do not internalize the costs of my teammate’s effort in the third match. This negative externality is actually good for team incentives.
The implied empirical prediction is the following. Comparing individual matches versus team matches, the probability of a comeback victory conditional on losing the first match will be larger in the team competition. A second prediction is about the very first match. Without the discouragement effect, the benefit from winning the first match is smaller. So there will be less effort in the first match in the team versus individual competition.
My son and I went to see the Cubs last week as we do every Spring.
The Cubs won 8-0 and Matt Garza was one out away from throwing a complete game shutout, a rarity for a Cub. The crowd was on its feet with full count to the would-be final batter who rolled the ball back to the mound for Garza to scoop up and throw him out. We were all ready to give a big congratulatory cheer and then this happened. This is a guy who was throwing flawless pitches to the plate for nine innings and here with all the pressure gone and an easy lob to first he made what could be the worst throw in the history of baseball and then headed for the showers. Cubs win!
But this Spring we weren’t so interested in the baseball out on the field as we were in the strategery down in the toilet. Remember a while back when I wrote about the urinal game? It seems like it was just last week (fuzzy vertical lines pixellating then unpixellating the screen to reveal the flashback:)
Consider a wall lined with 5 urinals. The subgame perfect equilibrium has the first gentleman take urinal 2 and the second caballero take urinal 5. These strategies are pre-emptive moves that induce subsequent monsieurs to opt for a stall instead out of privacy concerns. Thus urinals 1, 3, and 4 go unused.
So naturally we turn our attention to The Trough.
A continuous action space. Will the trough induce a more efficient outcome in equilibrium than the fixed array of separate urinals? This is what you come Cheap Talk to find out.
Let’s maintain the same basic parameters. Assume that the distance between the center of two adjacent urinals is d and let’s consider a trough of length 5d, i.e. the same length as a 5 side-by-side urinals (now with invincible pink mystery ice located invitingly at positions d/2 + kd for k = 1, 2, 3, 4.) The assumption in the original problem was that a gentleman pees if and only if there is nobody in a urinal adjacent to him. We need to parametrize that assumption for the continuos trough. It means that there is a constant r such that he refuses to pee in a spot in which someone is currently peeing less than a distance r from him. The assumption from before implies that d < r < 2d. Moreover the greater the distance to the nearest reliever the better.
The first thing to notice is that the equilibrium spacing from the original urinal game is no longer a subgame-perfect equilibrium. In our continuous trough model that spacing corresponds to gentlemen 1 and 2 locating themselves at positions d/2 and 7d/2 measured from the left boundary of the trough. Suppose r <= 3d/2. Then the third man can now utilize the convex action space and locate himself at position 2d where he will be a comfortable distance 3d/2>= r away from the other two. If instead r > 3d/2, then the third man is strictly deterred from intervening but this means that gentleman number 2 would increase his personal space by locating slightly farther to the right whilst still maintaining that deterrence.
So what does happen in equilibrium? I’ve got good news and bad news. The good news first. Suppose that r < 5d/4. Then in equilibrium 3 guys use the trough whereas only 2 of the arrayed urinals were used in the original equilibrium. In equilibrium the first guy parks at d/2 (to be consistent with the original setup we assume that he cannot squeeze himself any closer than that to the left edge of the trough without risking a splash on the shoes) the second guy at 9d/2 and the third guy right in the middle at 5d/2. They are a distance of 2d> r from one another, and there is no room for anybody else because anybody who came next would have to be standing at most a distance d< r from two of the incumbents. This is a subgame perfect equilibrium because the second guy knows that the third guy will pick the midpoint and so to keep a maximal distance he should move to the right edge. And foreseeing all of this the first guy moves to the left edge.
Note well that this is not a Pareto improvement. The increased usage is offset by reduced privacy.They are only 2d away from each other whereas the two urinal users were 3d away from each other.
Now the bad news when r >5d/4. In this case it is possible for the first two to keep the third out. For example suppose that 1 is at 5d/4 and 2 is at 15d/4. Then there is no place the third guy can stand and be more than 5d/4 away hence more than r from the others. In this case the equilibrium has the first two guys positioning themselves with a distance between them equal to exactly 2r, thus maximizing their privacy subject to the constraint that the third guy is deterred. (One such equilibrium is for the first two to be an equal distance from their respective edges, but there are other equilibria.)
The really bad news is that when r is not too large, the two guys even have less privacy than with the urinals. For example if r is just above 5d/4 then they are only 10d/4 away from each other which is less than the 3d distance from before. What’s happening is that the continuous trough gives more flexibility for the third guy to squeeze between so the first two must stand closer to one another to keep him away.
Instant honors thesis for any NU undergrad who can generalize the analysis to a trough of arbitrary length.
