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He died earlier this week.  If you grew up in Southern California, and you watched TV, you may have forgotten Cal Worthington but his dog Spot, the acres and acres of cars, the “Go See Cal”, the giant selection of cars and trucks on sale, the “open every day til midnight” and the music in the way “nineteen” springboarded the cars vintage out of your set and into your ears are all still stored away in some synapses somewhere in there and they’re all gonna come flowing out when you watch this video and probably bring with them a whole bunch of other stuff lost in there that you are gonna be pretty tickled to find again.  RIP Cal Worthington.

That commercial was rejected for the Super Bowl broadcast yesterday. And because of that it will be seen by many many people (even you!). Indeed the value of the publicity from being rejected rivals that of being accepted. You’ll get people actively watching your ad rather than just passively.

This is a problem for the broadcaster because first of all it is failing to capitalize on a valuable asset: the monopoly authority to reject ads. Second the plethora of rejected ads and their publicity dilutes the value of its other asset: the monopoly provider of broadcast airtime. So the Super Bowl broadcast network needs to find a way to capitalize on the publicity they can generate by rejecting ads and also to make rejected advertisers pay for the negative externality on accepted advertisers. How to do it?

Charge an enormous price to submit your ad for consideration. If you are accepted you get the submission fee refunded. If you are rejected, tough luck.

Added: You can also put a check box on the submission form allowing advertisers to secretly specify whether they want to be accepted or rejected.

Some might prefer the publicity/price of rejection over the actual broadcast. Without the checkbox they might not submit out of fear they will be accepted.

Imagine the publicity you can get when a marginal ad (like the one above) is rejected “unfairly.”

Consider a monopolist which sells two different goods to two independent markets. The firm sets the profit maximizing price in the two separate markets and suppose one of those prices is high and the other is low. Now suppose the firm bundles the two goods:  they are no longer sold separately but instead if you want one you must buy both.  The profit-maximizing price of the bundle will be higher than the low priced good but lower than the high priced good.  Consumers of the previously low-priced good are worse off, consumers of the previously high-priced good are better off because of the bundling.

This is one simple point to have in mind when thinking about bundling of cable channels versus a la carte pricing. The bundling mixes the elasticities of the two separate demand curves and leads to pricing in between the individual profit-maximizing prices.  If sports channels are in high demand and food channels are in low demand then people who like food but not sports are justified in complaining about bundling.

But as Alex Tabarrok points out, these complaints are often poorly targeted, instead focusing on the differential costs cable networks charge the cable companies for access.  Bundling is often viewed as a way of cross-subsidizing high-cost cable channels by raising prices on subscribers who view low-cost channels.  For example Kevin Drum, responding to an article in the LA Times breaking down the cable companies’ balance sheets, asks for a la carte pricing so that

“sports fans would be forced to pay the actual cost of their sports programming without being subsidized by the rest of us.”

Alex presents a simple example to demonstrate that this focus on costs is misguided. But just because they’ve got their reasoning wrong doesn’t mean they came to the wrong conclusion.  And in debunking the analysis Alex himself overlooks the basic point about bundling above.

The average voter’s prior belief is that the incumbent is better than the challenger. Because without knowing anything more about either candidate, you know that the incumbent defeated a previous opponent. To the extent that the previous electoral outcome was based on the voters’ information about the candidates this is good news about the current incumbent. No such inference can be made about the challenger.

Headline events that occurred during the current incumbent’s term were likely to generate additional information about the incumbent’s fitness for office. The bigger the headline the more correlated that information is going to be among the voters. For example, a significant natural disaster such as Hurricane Katrina or Hurricane Sandy is likely to have a large common effect on how voters’ evaluate the incumbent’s ability to manage a crisis.

For exactly this reason, an event like that is bad for the incumbent on average. Because the incumbent begins with the advantage of the prior.  The upside benefit of a good signal is therefore much smaller than the downside risk of a bad signal.

As I understand it, this is the theory developed in a paper by Ethan Bueno de Mesquita and Scott Ashworth, who use it to explain how events outside of the control of political leaders (like natural disasters) seem, empirically, to be blamed on incumbents. This pattern emerges in their model not because voters are confused about political accountability, but instead through the informational channel outlined above.

It occurs to me that such a model also explains the benefit of saturation advertising. The incumbent unleashes a barrage of ads to drive voters away from their televisions thus cutting them off from information and blunting the associated risks. Note that after the first Obama-Romney debate, Obama’s national poll numbers went south but they held steady in most of the battleground states where voters had already been subjected to weeks of wall-to-wall advertising.

A new joint paper with Alex Frankel and Emir Kamenica.  The talk begins with tennis, the discussion of American Idol begins at 12:14, how to write a mystery novel is at 15:51, the M. Night Shamyalan dilemma is at 17:32, the ESPN Classic dilemma is at 18:50, and the optimal sporting contest is at 28:37.

A great story on The Morning News about a guy who is trying to preserve his spoiler-free existence in the face of meddling Internets, bus riders, and Amazon delivery guys:

Well, don’t you worry. This book will be on your doorstep tomorrow afternoon, ready to read.

I, of course, could read the book–YOUR book–right now.

And I gotta admit, it WOULD be fun to be one of the first people in the world to know how it all ends.

Hmm. So, maybe I’ll just read the last page…

OH MY GOD I CANNOT BELIEVE IT!! IT WAS ALL A DREAM???!

Hah hah. I’m just yanking your chain. That’s not how it ends. Or maybe it IS, and I’m just saying it’s not so you’ll be doubly surprised when you finish it. You never know.

I really did read the last page, though. The final word is “haberdashery.” You can verify that when you get the book. Tomorrow. A full day after I had it.

I gotta tell ya, though: Now that I know how it ends, I kind of want to read the whole thing. If I start right now, I could probably finish it and get this book in the mail to you by Wednesday. You wouldn’t mind waiting a few extra days, would you?

Also, I dog-ear pages to save my place. I hope that’s OK.

j/k. I wouldn’t really read this book. 1,000 words about fairies? Yeah, no. Besides, who has the time? Some of us have to work for a living. For instance, I bust my hump 60 hours a week schlepping your books around.

Besides, I’d rather see the movie anyway. That chick who plays Hermione is smoking hot. I’d quidditch, if you know what I’m sayin’.

 Including analysis of the ncessary and sufficient epistemic conditions for an arbitrary statement to qualify as a spoiler:

  • Did your comment spoil my reading experience? Yes.
  • Was my experience any less spoiled because you didn’t know your comment was true? No.
  • Was my experience any less spoiled because you really, truly, honestly, swear to God didn’t mean to spoil the experience for anyone? No.
  • Was my experience any less spoiled because I knew your comment was true only by accident? Nope again.

Read it.  (Spoiler alert.)

This is a screenshot from an espn.com webstreaming replay of the French Open match between Maria Sharapova and Klara Zakapalova. As you can see Sharapova won the first set and now they are locked in a tight second set. But hmmm… something tells me that Zakapalova will be able to push it to three sets…

Courtesy of Emir Kamenica.

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.

  1. 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.”
  2. Also, Greg Taylor has a good analysis in the comments to Friday’s post.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. In any case, this video is an essential companion to the original for any undergraduate game theory course.
  9. 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

Reality shows eliminate contestants one at a time. Shows like American Idol do this by holding a vote. The audience is asked to vote for their favorite contestant and the one with the fewest votes is eliminated.

Last week on American Idol something very surprising happened. The two singers who were considered to have given the best performances the night before, and who were strong favorites to win the whole thing received among the fewest votes. Indeed a very strong favorite, Jessica Sanchez was “voted off” and only survived because the judges kept her alive by using their one intervention of the season.

The problem in a nutshell is that American Idol voters are deciding whom to eliminate but instead of directly voting for the one they want to eliminate, they are asked to vote for the person they don’t want eliminated.  This creates highly problematic strategic incentives which can easily lead to a strong favorite being eliminated.

For example suppose that a large number prefers contestant S to all others. But while they agree on S, they disagree about the ranking of the other contestants and they are interested in keeping their second and third favorites around too.

The supporters of S have a problem:  maintaining support for S is a public good which can be undermined by their private incentives.  In particular some of them might be worried that their second favorite contestant needs help. If so, and if they think that S has enough support from others, then they will switch their vote from S to help save that contestant. But if they fail to coordinate, and too many of the S supporters do this, then S is in danger of being eliminated.

This problem simply could not arise if American Idol instead asked audiences to vote out the contestant they want to see eliminated. Consider again the situation described above.  Yes there will still be incentives to vote strategically, indeed any voting system will give rise to some kind of manipulation.  But a strong favorite like S will be insulated from their effects. Here’s why.  An honest voter votes for the contestants she likes least.  A strategic voter might vote instead for her next-to-least favorite.  She might do this if she thinks that voting out her least-favorite is a wasted vote because not enough other people will vote similarly.  And she might do this if she thinks that one of her favorite contestants is a risk for elimination.

But no matter how she tries to manipulate the vote it will be shifting votes around for her lower-ranked contestants without undermining support for her favorite. Indeed it is a dominated strategy to vote against your favorite and so a heavily favored contestant like S could never be eliminated in a voting-out system as it can with the current voting-in system.

“Today’s protest was a lesson for everyone,” said Andrei Medvedev in the evening broadcast of Rossia 1. “It turns out that, to express your dissatisfaction with the authorities, it is possible to gather on a square after getting permission from those same authorities. And to keep order, all you really have to do is give a polite admonition.”

Other strangely unusual goings on described here.  Ushanka shake:  Gary Charness.

Stefan Lauermann points me to a new paper, this is from the abstract:

Our analysis shows that both stake size and communication have a significant impact on the player’s likelihood to cooperate. In particular, we observe a negative correlation between stake size and cooperation. Also certain gestures, as handshakes, decrease the likelihood to cooperate. But, if players mutually promise each other to cooperate and in addition shake hands on it, the cooperation rate increases.

I just caught the first episode, “Heat and Meat”, of the new season of Next Iron Chef. There were two parts to the competition. In the first part, chefs worked in pairs cooking a pig (the meat) over an open fire (the heat) in the wilderness. In the second part, the two chefs in the losing team had to face each other in a sudden death cookoff.  If you get to choose your teammate, one obvious strategy is to pick the best chef standing.  This maximizes your chance of winning outright and hence avoiding the elimination round. In fact, chef-contestant Spike got to pick the teams and did exactly this by picking Marcus Samuelsson whom he took to be the best chef.  (I missed the start of the episode so I do not know how Spike got chosen to be in this powerful position).

Things did not work out as Spike hoped.  Marcus and Spike ended up at the bottom of the pile. Spike then lost to Marcus in “battle scallop”.

What did Spike do wrong?  Obviously, picking the best chef as your partner carries a big risk – if you end up in the elimination round, you will likely lose.  Better to hedge by choosing a worse chef.  This increases the chance you get into the elimination round but also decreases the chance you do not make it out of the round.  Spike should have picked Alex Guarnaschelli.  She is a good cook but she gets tense and nervous.  A good partner for round 1 and also a weak competitor in round 2.  Perfect.

Spake Kim:

“I got caught up with the hoopla and the filming of the TV show that when I probably should have ended my relationship, I didn’t know how to and didn’t want to disappoint a lot of people,” the post said.

That explains it.

From Jonah Lehrer:

One week later, all the subjects were quizzed about their memory of the product. Here’s where things get disturbing: While students who saw the low-imagery ad were extremely unlikely to report having tried the popcorn, those who watched the slick commercial were just as likely to have said they tried the popcorn as those who actually did. Furthermore, their ratings of the product were as favorable as those who sampled the salty, buttery treat. Most troubling, perhaps, is that these subjects were extremely confident in these made-up memories. The delusion felt true. They didn’t like the popcorn because they’d seen a good ad. They liked the popcorn because it was delicious.

The article is interesting, you should check it out. These stories always sound impossible to believe.  It just doesn’t seem so easy to manipulate memories.  But it’s not all that surprising when you think about it.

  1. You have dreams where impossible things happen, where people you know have changed dramatically out of the blue, or where your life is completely changed. And when you have a dream like that you say “this is strange” and then you accept it as true and go on.  It’s incredibly easy for you to believe in impossible things.  And often you do it by convincing yourself that in fact its been like this all along.
  2. False memories sound impossible, but on the other hand we forget things all the time.  Forgetting something is not all that different from a false memory. “Where did you put your keys?”  “I didn’t put them anywhere.  Somebody else must have put them somewhere.”  And then you find the keys and remember that in fact you did put them there.  You have not just forgotten something but you have believed in the false memory that the thing never happened.

So why are these the current “market probabilities” for American Idol?

  1. Lauren Alaina to be eliminated tonight: 50%
  2. Haley Reinhart to be eliminated tonight:  58%
  3. Scotty McReery to be eliminated tonight: 15%

The winning percentages also add up to more than 100.  Is it not possible to short them all?

Thanks to Zeke for the pointer.

It occurs to me that in our taxonomy of varieties of public goods, we are missing a category.  Normally we distinguish public goods according to whether they are rival/non-rival and whether they are excludable/non-excludable.  It is generally easier to efficiently finance excludable public goods because people by the threat of exclusion you can get users to reveal how much they are willing to pay for access to the public good.

I read this article about Piracy of sports broadcasts and I started to wonder what effect it will have on the business of sports.  Free availability of otherwise exclusive broadcasts mean that professional sports change from an excludable to a non-excludable public good.  This happened to software and music but unique aspects of those goods enable alternative revenue sources (support in the case of software, live performance in the case of music.)

For sports the main alternative is advertising.  And the only way to ensure that the ads can’t be stripped out of the hijacked broadcast, we are going to see more and more ads directly projected onto the players and the field.

And then I started wondering what would be the analogue of advertising to support other non-excludable public goods.  The key property is that you cannot consume the good without being exposed to the ad.  What about clean air?  National defense?

But then I realized that there is something different about these public goods.  Not only are they not excludable– a user cannot be prevented from using it, but they are not avoidable — the user himself cannot escape the public good.  And there is no reason to finance unavoidable public goods by any means other than taxation.

Here’s the point.  If the public good is avoidable, you can increase the user tax (by bundling ads) and trust that those who don’t value the public good very much will stop using it.  Given the level of the tax it would be inefficient for them to use it.  Knowing that this inefficiency can be avoided you have more flexibility to raise the tax, effectively price discriminating high-value users.

If the public good is unavoidable, everyone pays whether you use ads or just taxation (uncoupled with usage), so there really isn’t any difference.

So this category of an avoidable public good seems a useful one.  Can you think of other examples of non-excludable but avoidable public goods?  Sunsets: avoidable.  National defense:  unavoidable.

Groovy Action At A Distance

Isaac Washington was so cool
That when he left his stateroom
He would set the door in motion
With the precise velocity
That in the time it would take
For the deceleration
To bring the locking mechanism
To a halt
An infinitessimal measure short
Of fully shut
He has walked
No, drifted,
Just far enough across the deck
At which distance
The radiant force of his
Cool
Was just enough to induce
The final click.

The season finale of Bachelor Pad featured a surprise twist.  The share of the prize money would be decided by a “keep” or “share” Prisoners’ Dilemma-style game.  $250,000 was at stake and the last standing couple, Dave and Natalie, could split the money if they both chose Share.  If one of them chose “Keep” then he/she would take all the money for him/her-self.  If they both chose “Keep” the $250,000 would be shared among all the contestants who were previously eliminated from the show.

What makes this game different from the Golden Balls game is that the decision to Share doubles as a signal to be a faithful partner in their post-show everlasting love.

The clip below is a bit long, but the highlight comes in the middle when the loser bachelor(ettes) give their game theoretic analyses while Dave and Natalie go into separate rooms to prove theorems.

Thanks to Charles Murry for the pointer.

Parallel paths meet and end on one astounding episode of The Price is Right. Beautiful writing.

Ted says that when he went back for the afternoon taping, the producers moved him to a part of the studio where the contestants couldn’t see him. He says that he has heard “through unofficial channels” that he has been banned from the Bob Barker Studio, the way casinos have started asking Terry not to play blackjack inside their walls again. That Kathy Greco gave him a “Sicilian death stare” after the show, and that nobody ever needs a three-digit PIN. That according to his database, the Big Green Egg had appeared on the show only twice — before Terry and Linda began recording it — and that it was $900 before it was $1,175. That so many contestants — not just Terry — had won that day because they had listened to him. That his only mistake came when Terry played Switch?, because Ted didn’t realize there were two bikes, and he thought that a terabyte sounded like a lot of memory. That he was edited out of the show when it aired, that he can be seen only once, shaking his head when the prize is a Burberry coat, a prize that had never before appeared on the show. Otherwise, he would have known how much it was worth, the way he knew that a Berkline Contemporary Rock-a-Lounger was worth $599, and Brandon’s Ducane gas grill was worth $1,554, and Sharon’s car was worth $18,546. And for all that knowledge, for all his devotion, Bob Barker had called him a Loyal Friend and True, and Drew Carey called him that guy in the audience.

Deerstalker display:  The Browser.

The atmosphere of melancholia on the show Mad Men has to broken by brief bursts of bright comedy or an undercurrent of sexual intrigue.  In this instance, the show indulged in the use of (at least) three strategic ploys to distract us from the plight of sad, newly divorced Don Draper regretting he boinked his secretary.

Draper’s ad agency SCDP is facing competition from a small entrant, say agency X (I forgot the name).  SCDP has lost some accounts and is bidding for a new contract from Honda.  Honda has put strict limits on the bid, stipulating that only a storyboard should be presented, not a filmed ad.  SCDP cannot afford to produce a filmed ad and nor can agency X.  Also, Don believes the Japanese might not appreciate the rules of their auction being broken.  He comes up with a bluff: pretend to  make a filmed ad and thereby trick agency X into making one.  The Japanese will reject them and agency X will be driven close to bankruptcy. The ploy works not because of the clichéd Japanese cultural stereotype embraced by Don but because Honda is using its own strategic ploy: it gets a better deal from its existing agency by threatening to switch to the winner from the auction.

Two players bluffing and lying.

And then another player, Dr. Faye, reveals her bluff.  She is not really married and is wearing a wedding ring to ward off unwanted male attention.  She tells Don and he wonders why she told him.  Faye smiles slightly.  We know why she revealed her hand and we wonder why Don doesn’t get read it.  Married-Winner-Don of Seasons 1 to 2 and perhaps even Season 3 would have worked it out immediately. But Single-Loser-Don of Season 4 is missing even blindingly obvious signals.  I guess codes will be broken in a later show.

First watch the video below.  The dark haired guy, Booth, has just made a big bet. He is claiming to have three-of-a-kind (fours).  If he does he would win the hand, but he might be bluffing.  The other guy, Lingren, has to decide whether to call the bet and he does something unexpected:  he asks Booth to show him one of his cards:

The strategic subtext is this:  if Booth has the third four then he wants Lingren to call.  If not, he wants him to fold.  Implicitly, Lingren is offering the following mechanism:  if you do have the third four then you won’t want me to know it because I would then fold.  So show me a card, and if it’s not a four I will call you.

What is left unsaid is what Lingren would do if Booth declined to show a card.  The spirit of the mechanism is that showing a card is the price Booth has to pay to have his bet called.  So the suggestion is that Lingren would fold if Booth is not forthcoming because that would signal that he is hiding his strong hand.

But in fact this can’t be part of the deal because it would imply exactly the opposite of Lingren’s expectations.  Booth, knowing that it would get Lingren to fold, would in fact hide his cards when he is bluffing and show a card when he actually has the three-or-a-kind (because then he gets a 50% chance of having his bet called rather than a 100% chance of Lingren folding.)

So what exactly should happen in this situation?  And did Booth really play like a genius? Leave your analysis in the comments.

Visor visit: the ever-durable Presh Talwalker.

In a recent episode of Top Chef, the remaining contestants were split into two groups, say A and B.  Group A had to vote for the best and worst dishes in Group B and vice-versa.  One the two contestants with the worst dishes gets eliminated by the usual judges, i.e.not the contestants.

All the contestants cooked in the same kitchen so they could match each dish to each chef (and, in any case, each chef introduced his own dish). So, each voter knows which chef’s chances of surviving she is affecting by voting for or against his dish.  In the next episode, each voter – if they survive till the next round – competes with the remaining chefs.  So, other things being equal, the optimal strategy is simple: each voter should vote for the weakest candidate in the other group and against the strongest candidate. There have been enough episodes for everyone to pretty much agree on who the best and worst cooks are in each group.  The “rational choice” calculation: you want to maximize the chances of winning so you want to be matched up against the worst chefs in future rounds and get rid of the best chefs if possible.

One caveat is that in future rounds, contestants will be judged by the usual crew of Tom, Padma etc so you might care about your reputation with them.  But the evidence from past series strongly suggests that they do not vote against “strategic” contestants.  Food is important and, for the producers, drama.   Strategic behavior might actually help you survive longer if you create drama.

This “rational choice” prediction had at most a 50% success rate.  One group did choose one of the strongest contestants, Kenny, from the other group for the worst dish.  And he did claim that he’d been put on the chopping block to eliminate a future threat.  But the strongest guy in the other group, Angelo, did not get close to elimination.  And maybe Kenny did have the worst dish.

It’s interesting to speculate on why the obvious rational choice prediction is not borne out.  Perhaps people are honest or it is very hard to lie about a dish when its obviously good – the verifiable information makes it difficult to dissemble.  It’s also hard to be disliked.  The contestants all live in the same house.  In some episodes they cook together and have to coöperate.  Everyone cam remember the hated Marcel from an earlier season!  Voting is sequential which exasperates the problem – the first person to vote does not want to come out as an evil strategic player and the later people to vote know they can’t impact the outcome anyway. So, perhaps reputation among the contestants themselves is important.

If they use the same Cold War conceit next season, I would love to have anonymous voting.  Behind the veil of ambiguity, people might be more strategic.  It would add to the drama – the following week’s episode will be full of intrigue if a good chef gets knifed (figuratively!) in the back.

I spent one year as an Associate Professor at Boston University.  The doors in the economics building are strange because the key turns in the opposite way you would expect.  Instead of turning the key to the right in order to pull the bolt left-to-right, you turn the key to the left.  For the first month I got it wrong every morning.

Eventually I realized that I needed to do the opposite of my instinct.  And so as I was just about to turn the key to the right I would stop myself and do the opposite.  This worked for about a week.  The problem was that as soon as I started to consistently get it right, it became second nature and then I could no longer tell what my primitive instinct was and what my second-order counter-instinct was.  I would begin to turn the key to the left and then stop myself and turn the key to the right.

I have since concluded that it is basically impossible to “do the opposite” and that we are all lesser beings because of it.  We could learn from experience much faster if we had the ability to remenber what our a) what our natural instinct is b) whether it works and c) to do the opposite when it doesn’t.

We could be George Castanza:

About a year ago I posted a link to a YouTube video of the Golden Balls “Split or Steal” game, hailing it as a godsend for teachers of game theory and the Prisoners’ Dilemma.  That video has made its way around the web in the year since and I sat down to prepare my introductory game theory lecture yesterday looking for something new.

Well, it turns out that now there are many, many new videos of Split or Steal on YouTube and you can spend hours watching these.  Here is my favorite and the one I used in class today.

I also heard from Seamus Coffey who has analyzed the data from Split or Steal games and finds:

  • Women are more cooperative than men, non-whites more than whites, the old more cooperative than the young.
  • There is more cooperation between opposite-sex players than when the players are of the same sex.
  • The young don’t cooperate with the old, and the old discriminate even more against the young.
  • Blonde women cooperate a lot.  Men cooperate less with blondes than with brunettes.

Here is a link to a paper by John List who looks at similar patterns in the game Friend or Foe.

Honestly I have no good theory.  Here are some rejected ones:

  1. They are the only ones sufficiently lacking in self-respect.
  2. Since ads drive everything what matters is the audience still watching at halftime.  By that time the geezers have already drunk enough to be glued to their sofas, but not enough yet to be asleep.
  3. Only Pete Townsend’s generation knows how to count to XLIV.
  4. It’s a kind of best-of the has-beens competition.  A shadow rock-and-roll hall of fame.
  5. You can hide their spectacles and tell them its Carnegie Hall.
  6. Minimizes the, ehem, fallout from wardrobe malfunctions.

Mind Your Decisions looks at the game theory of the classic Thanksgiving showdown between Lucy and Charlie Brown.

Time after time, Lucy would bring her football to the park and entice Charlie Brown to practice some place kicks.  Lucy would hold the ball, Charlie Brown would run full-steam to kick it only to have Lucy snatch the ball away at the last minute sending Charlie Brown flying, yelling ARRRRGGGHHH and landing in a heap.  What a blockhead.  Sure you can understand his willingness to trust her the first time, maybe even the first two times, but after that it’s pretty clear what Lucy’s objective is.

You may try to make excuses for Charlie Brown by arguing that subgame-perfection requires a great deal of strategic sophistication.  But you don’t need to invoke any refinements here.  The unique Nash equilibrium action for Charlie Brown is to say no.  Even worse, not yanking the ball is a weakly dominated strategy for Lucy and after that strategy is eliminated, Charlie Brown has a strongly dominant strategy to walk away.

So it is not surprising that in It’s The Great Pumpkin Charlie Brown, he has finally figured this out and flatly refuses to play Lucy’s game.  That’s when she goes contract theory on him.

Now we are reaching higher-order blockheadness.  First of all, whether or not the contract is valid, its terms are not verifiable to a court.  And Charlie Brown should be able to figure out there is something fishy about this contract.  Lucy would only offer a contract if she preferred the outcome (run, don’t yank) to the outcome (walk away).  But even though Lucy has never directly revealed any preference between these two outcomes, there is pretty good evidence that the worst possible outcome for Lucy would be to see Charlie Brown successfully kick.

Indeed, Lucy knew from the beginning that Charlie Brown would eventually figure out her intention to yank the ball.  After that, she knows Charlie Brown will refuse to play.  So if Lucy really preferred (run, don’t yank) to (walk away) then she would prevent this evaporation of trust by allowing Charlie Brown to kick the ball at least a few times, but she never did.

The only way to rationalize Lucy’s steadfast insistence on sending him flying is to assume either that (run, don’t yank) is her least-preferred outcome, or that she thinks that Charlie Brown is indeed a blockhead and unable to deduce her intentions.  In either case, Charlie Brown should have viewed Lucy’s contract with deep suspicion.

Shows that are widely time-shifted are not losing money due to skipped commercials.

Against almost every expectation, nearly half of all people watching delayed shows are still slouching on their couches watching messages about movies, cars and beer. According to Nielsen, 46 percent of viewers 18 to 49 years old for all four networks taken together are watching the commercials during playback, up slightly from last year.

On net, the gain in viewership from time-shifted shows often more than compensates for the few who skip ads.

When NBC added the “The Jay Leno Show” at 10 each weeknight, it boasted that the show would be “DVR proof,” meaning that because the humor was topical, viewers were more likely to watch it live, avoiding much of the commercial-skipping that was expected to plague recorded shows.

Now being “DVR proof” looks like a disadvantage. Mr. Leno’s shows were among the few with three-day commercial ratings lower than their live ratings. Not enough people have been recording the show and playing it back to overcome the commercial-skipping being done by a percentage of its live viewers.

From the NY Times.

Comcast is in talks with GE to buy NBC Universal which would give Comcast all of NBC’s television and movie assets. According to the Wall Street Journal we should know in a matter of weeks if agreement is reached but any deal would certainly be given a lengthy review by anti-trust authorities. A concern often cited is the motive of vertical foreclosure: a merged Comcast-NBC would use their alliance to gain advantage over competitors for content provision. This issue also foreshadows those that would arise with internet content provision should net-neutrality be abandoned.

Comcast is a monopoly provider of access to content. Think of Comcast as the guy at the door charging you a fee to get into the party. You want to get in because inside there are people providing various services, perhaps for an additional fee. The best structure of all for Comcast would be to take ownership of all the service-providers inside and act as a joint monopoly collecting entrance fees and selling the services inside.

What would such a monopoly do to maximize profits? It would maximize the value of the services offered inside and then extract that value in the form of an entrance fee.

But this same outcome is achieved with the structure in which the services inside are provided competitively. Competition among service providers maximizes the value of the service thereby enabling the monopoly gatekeeper to earn the same profits as if it owned the entire enterprise.

So if you think that content is provided competitively (in my opinion its pretty close) then you shouldn’t worry too much about vertical foreclosure. On the other hand we should still wonder why Comcast is interested in NBC. Are there any plausible efficiency gains from a merger?

Merger review is based on looking for likely anti-competitive results or motives and if there is no clear anti-competitive motive then the merger is approved. But it’s worth considering a different standard here (and in the net-neutrality debate as well.) If there are no clear efficiency gains and a merger enables anti-competitive behavior even though that behavior may not have any clear rationale, then the merger should be rejected.

Allowing the merger would be like leaving scissors within reach of my (then) three-year-old. No good will come of it, and if I trust that she acts in her self-interest no harm would come either. But she is hard to predict:

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Whatever the merits of the claims made about Fox News by Obama’s communications team, it can be good strategy to pick a fight with your critics.  To the very long list of reasons, add this one.  If you can make them so angry that they lose the will to say anything at all nice about you, then you have won a major victory. For then they will have lost all (remaining) credibility.

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