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Heather Christle tweeted:
Pacifico beer tastes like it’s mad at me.
On the other hand, Elk Cove 2007 Wilamette Valley Pinot Noir tastes like it’s embarrassed by me. Almost as if we met once before on chatroullette and sensed immediately that we were bound by some primitive psychic traction and for the briefest instant we realized how all of history had in fact led us to this seemingly random moment, face to digitized face; only to be stopped, not more than an instant later by the simultaneous fear that our common epiphany could not be real but instead just a projection of our own deep sense of unfulfillment which now was out in the open plainly readable on our faces, the shame of which brought an end, by synchronized Nexting, to our only chance at untying life’s eternal knot, and as if now we have bumped into each other again at a party, introduced by mutual friends, and Elk Cove 2007 Wilamette Valley Pinot Noir glanced at its watch and escaped, avoiding eye contact and stammering about late hours and lost sleep.
While we are on the subject, you would be well-advised not to follow me on Twitter. Here is the link not to follow. Here are the kinds of things you are better off avoiding.
The big news is that AT&T will be discontinuing its unlimited use data plans effective next week which happens to coincide with Steve Jobs worst-kept-secret announcement of the next-generation iPhone. People are up in arms.
Unlimited, all-you-can-eat wireless data was a beautiful thing for Apple devices on AT&T, delivering streams of Pandora, YouTube videos, a million tweets, and hundreds of webpages without worry. And now it’s dead.
AT&T’s new, completely restructured mobile data plans for both iPhones and iPads have officially launched the era of pay-per-byte data, which we’ve known was coming. We just hoped it would take a little longer. It’s the anti-Christmas.
One thing to keep in mind is that unlimited use tariffs are not part of an efficient or profit-maximizing pricing policy whether you consider monopoly or perfect competition. It is hard to imagine a model under which unlimited use makes sense unless there is zero marginal cost. (If marginal cost is positive then under unlimited use your usage will typically go beyond the point where your marginal value exceeds marginal cost. Whatever the market structure, this would be replaced by marginal cost pricing possibly with a reduced fixed fee.)
Still the specific form of the tariff– zero per-MB cost up to some limit and then a steep price after that– annoys many people. In fact, there are theories that show that this kind of pricing is the best way to exploit consumers who don’t accurately forecast their own usage.
But this brings me to the second thing to keep in mind. Those exploits take advantage of people who underestimate their usage. But here is the actual pricing menu.
I bet that you actually overestimate your usage. I use my phone a lot for browsing the web, maps, etc. and I average under 200 MB per month. Because some months I do go above 200MB, I will buy the 2GB plan for $25 (I don’t need tethering.) My wife on the other hand never goes above 200MB. So the new plan is a better deal for us.
Here’s how to check your usage.
Jonah Lehrer has a post
about why those poor BP engineers should take a break. They should step away from the dry-erase board and go for a walk. They should take a long shower. They should think about anything but the thousands of barrels of toxic black sludge oozing from the pipe.
He weaves together a few stories illustrating why creativity flows best when it is not rushed. This is something I generally agree with and his post is good read but I think one of his examples needs a second look.
In the early 1960s, Glucksberg gave subjects a standard test of creativity known as the Duncker candle problem. The problem has a simple premise: a subject is given a cardboard box containing a few thumbtacks, a book of matches, and a waxy candle. They are told to determine how to attach the candle to piece of corkboard so that it can burn properly and no wax drips onto the floor.
Oversimplifying a bit, to solve this problem there is one quick-and-dirty method that is likely to fail and then another less-obvious solution that works every time. (The answer is in Jonah’s post so think first before clicking through.)
Now here is where Glucksberg’s study gets interesting. Some subjects were randomly assigned to a “high drive” group, which was told that those who solved the task in the shortest amount of time would receive $20.
These subjects, it turned out, solved the problem on average 3.5 minutes later than the control subjects who were given no incentives. This is taken to be an example of the perverse effect of incentives on creative output.
The high drive subjects were playing a game. This generates different incentives than if the subjects were simply paid for speed. They are being paid to be faster than the others. To see the difference, suppose that the obvious solution works with probability p and in that case it takes only 3.5 minutes. The creative solution always works but it takes 5 minutes to come up with it. If p is small then someone who is just paid for speed will not try the obvious solution because it is very likely to fail. He would then have to come up with the creative solution and his total time will be 8.5 minutes.
But if he is competing to be the fastest then he is not trying to maximize his expected speed. As a matter of fact, if he expects everyone else to try the obvious solution and there are N others competing, then the probability is 
So it is an equilibrium for everyone to try the quick-and-dirty solution, and when they do so, almost all of them (on average a fraction 1-p of them) will fail and take 3.5 minutes longer than those in the control group.
Consider the game among a couple and their male marriage counselor. The problem for the marriage counselor is to prove that he is unbiased. It is common-knowledge at the outset that the wife worries that a male marriage counselor is biased and will always blame the wife.
Indeed if 10 weeks in a row they come in for counseling and talk about the week’s petty argument (how to stack dishes in the dishwasher, whether it matters that the towels are not folded corner-to-corner, etc.) he everytime sides with the husband, eventually the wife will want to find a new counselor.
So what happens after 9 weeks of deciding for the husband? Now all parties know that the counselor is on his last leg. He must start siding with the wife in order to keep his job, even if the husband is actually in the right (i.e. even if throwing out the 3-day old soggy quesadilla in the refrigerator was the right thing to do.) But that means that he’s now biased in favor of the wife and so the husband will fire him.
We have just concluded that if he decides for the husband 9 times in a row he will be fired. So what happens on week 9 in the rare event that he has decided for the husband 8 times in a row. Same thing, he is strategically biased in favor of the wife and he will be fired.
By induction he is biased even on week 1.
(NB: my marriage is beautiful (no counseling) and there is nobody who can fold a towel faster than me.)
David Leonhardt had an interesting column on underestimation of risk. BP’s possible underinvestment in protecting against a gross accident is exhibit one.:
The people running BP did a dreadful job of estimating the true chances of events that seemed unlikely — and may even have been unlikely — but that would bring enormous costs.
Perhaps the easiest way to see this is to consider what BP executives must be thinking today. Surely, given the expense of the clean-up and the hit to BP’s reputation, the executives wish they could go back and spend the extra money to make Deepwater Horizon safer. That they did not suggests that they figured the rig would be fine as it was.
But this does not prove the case. You may buy a stock given the odds of it going up or down. If it goes down you will regret your investment. This does not prove it was wrong to invest in the first place. It might have been right given your initial assessment. The same logic applies to BP.
This is a simple point: regret does not imply that the ex ante decision was bad. Leonhardt is a great economics commentator and journalist. The fact that he makes this elementary mistake shows how easy it is to make.
But there is another factor at work. It is impossible to determine BP’s probability assessment after the fact. They can always claim the chance of a disaster was low. There is no historical data against which to measure their assessment. All we are left with is the option to blame them even if their decision was perfect from an ex ante perspective. Blame involves saying them made a bad decision and holding them to account. This was the key element in Jeff’s earlier post on the Blame Game.
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:
In a famous paper, Mark Walker and John Wooders tested a central hypothesis of game theory using data on serving strategy at Wimbledon. The probability of winning a point conditional on serving out wide should equal the probability conditional on serving down the middle. They find support for this in the data.
A second hypothesis doesn’t fare so well. Walker and Wooders suggest that the location of the serve should be statistically independent over time, and this is not borne out in the data. The reason for the theoretical prediction is straightforward and follows from the usual zero-sum logic. The server is trying to be unpredictable. Any serial correlation will allow the returner to improve his prediction where the serve is coming and prepare.
But this assumes there are no payoff spillovers from point to point. However it’s probably true that having served to the left on the first serve (and say faulted) is effectively “practice” and this makes the server momentarily better than average at serving to the left again. If this is important in practice, what effect would it have on the time series of serves?
It has two effects. To understand the effects it is important to remember that optimal play in these zero-sum games is equivalent to choosing a random strategy that makes your opponent indifferent between his two strategies. For the returner this means randomly favoring the forehand or backhand side in order to equalize the server’s payoffs from the two serving directions. Since the server now has a boost from serving, say, out wide again, the returner must increase his probability of guessing that direction in order to balance that out. This is a change in the returner’s behavior, but not yet any change in the serving probabilities.
The boost for the server is a temporary disadvantage for the returner. For example, if he guesses down the line, he is more likely to lose the point now than before. He may also be more likely to lose the point even if he guesses out wide, but lets say the first outweighs the second. Then the returner now prefers to guess out wide. The server has to adjust his randomization in order to restore indifference for the returner. He does this by increasing the probability of serving down the line.
Thus, a first serve fault out wide increases the probability that the next serve is down the line. In fact, this kind of “excessive negative correlation” is just what Walker and Wooders found. (Although I am not sure how things break down within-points versus across-points and things are more complicated when we consider ad-court serves to deuce-court serves.)
(lunchtime conversation with NU faculty acknowledged, especially a comment by Alessandro Pavan.)
background here.
I found this recipe on a now-defunct foodie blog a few years ago. It’s a pretty good replica of the grilled corn you find at Taipei Night Markets. Sweet, spicy and savory, it’s the definition of summer at our house.
The preparation is very simple, provided you have an immersion blender. You can make it by hand but its a fair bit of work.
To make about 6 ears of corn, dissolve 2t of sugar in 2T of soy sauce in the plastic vessel that goes with your immersion blender. Add 1 minced garlic clove, 1 minced shallot and 2T vegetable oil. (If you don’t have the blender, you will have to first pulvarize the garlic and shallot until they form a paste.) Blend until you have a thick sauce. Add cayenne pepper to taste.
Peel the corn fully and baste with the sauce. Place on a medium-hot grill. Continually turn and baste until they look like this (pictured alongside grilled lobster tails and a lovely Sauvignon Blanc from Quincy.)
Total grilling time is about 10-15 minutes.
Naming rights raise a lot of money. Think of professional sports stadiums like Chicago’s own US Cellular Field (does US Cellular still exist??) The amazing thing to me is that when Comiskey Park changed names to “The Cell,” local media played right along and gave away free advertising by parroting the name in their daily sports roundups. Somehow the stadium knew that this coordination/holdup problem would be solved in their favor.
We should seize on this. But not by selling positive associations to corporations that want to promote their brand. Instead lets brand badly-behaving corporations with negative associations.
The Exxon Valdez oil spill is a name that stuck. Every single time public media refer to that event they remind us of the association between Exxon and the mess they made. No doubt we will continue to refer to the current disaster as the BP Gulf spill or something like that. That is good.
But why stop there? (Positive) advertisers have learned that you can slip in the name of a brand before, after, and in-between just about any scripted words and call it an ad. The Tostitos Fiesta Bowl. The Bud Lite halftime show. The X brought to you by Y. These are positive associations.
Think of all the negative events and experiences that are just waiting to be put to use as retribution by negative association. “And today I am here to announce that the BP National Debt will soon reach 15 trillon Dollars.” Or “The BP recession is entering its fifth consecutive quarter with no end in sight.”
Why are we wasting hurricane names on poor innocents like Katrina and Andrew? I say for the 2010 hurricane season we ditch the alphabetical order and line em up in order of egregiousness. “Hurricane Blackwater devastates the Florida Coast. Tropical Storm Halliburton kills hundreds in Central America.”
The nice thing about negative naming is that supply is virtually unlimited. Cities don’t go selling the names of every street in town because selling the marginal street requires lowering the price. But you can put the name of every former VP at Enron and Arthur Andersen on their own parking meter and the last one makes you want to spit just as much as the first. Hey, what about parking tickets? This parking ticket is brought to you by Washington Mutual.
Suddenly the inefficiency of city bureaucracy is a valuable social asset. Welcome to the British Petroleum DMV, please take your place in line number 8. And some otherwise low-status professions will now be able to leverage that position to provide an important public service. “There’s some stubborn tartar on that molar, Ms. Clark, I’m going to have to use the Toyota Prius heavy-duty scaler. You might feel some scraping. Rinse please.”
“Good Afternoon, Pleasant Meadow Morturary, will you be interested in Goldman Sachs cremation services today?” Or “Mr. Smith we are calling to confirm your appointment for a British Petroleum colonoscopy on Monday. Please be on time and don’t eat anything 24 hours prior.”
Just as positive name-association is a lucrative business, these ne’er-do-wells would of course pay big money to have their names removed from the negative icons and that’s all for the better. If the courts can place a cap on their legal liability this gives us a simple way to make up the difference.
And I am ready to do my part. As much as I like one-word titles Sandeep and I are going to add a subtitle to our new paper. Its going to be called “Torture: Sponsored by BP.”
Sean left an interesting comment on my earlier post which got me thinking: If Springsteen does not price discriminate ticket sales, the resale market will do it for him, charging high prices for rationed tickets and getting surplus from high willingness to pay consumers. So, even if Bruce wants to sell tickets for cheap to his fans, the fans get screwed by the scalpers. Then, Bruce should come up with some other way to help his blue collar fans. One way would be to price-discriminate like a profit-maximizer and then give refunds to loyal fans. Maybe, you can use your fan club to give refunds to members who attend your concert or something of that ilk. And fans might even prefer giving money to Bruce than to scalpers: after all they’re probably pirating all his albums and concerts are his main source of revenue!
So, the prevalence of the resale market is puzzling: why don’t bands, plays etc simply price optimally and eliminate the scalpers? I looked for some research on this and found a paper by Pascal Courty, “Some Economics of Ticket Resale“. His theory has two parts: (Part 1) Suppose some people only realize over time whether they are free to attend a concert while other diehard fans know immediately. At the time you set ticket prices, the late bloomers do not yet know their demand. If you price too high the diehard fans will not buy as they can’t afford it. The late-blooming consumers won’t buy as they’re not yet sure they can attend. So, the promoter prices low and diehard fans and scalpers buy tickets. As time goes buy the late bloomers who are free to attend the concert demand tickets and scalpers rip them off. (Part 2) Scalpers are always more flexible than promoters. If promoters attempt to enter the late-blooming market, scalpers can always undercut them.
And there is some empirical work too. Connolly and Krueger in Rockonomics present data on ticket pricing and on Krueger’s experience at a Springsteen concert.
What do you do in the following awkward situation? your friend receives an invitation to a party. The host is also your friend but you haven’t received an invitation.
Was the invitation lost in the mail or were you not invited? You can’t ask the host directly because it would be too uncomfortable if the answer was you weren’t invited. But in the event that the invitation was lost in the mail it is in all parties’ interest in having that uncertainty resolved.
There would seem no custom that would allow communication of the good news and at the same time avoid communication of the bad news.
But RSVP does exactly that, as long as the custom is to RSVP both acceptances and regrets. Then if you were invited but you do not RSVP the host will know you didn’t get the invitation, and send a followup.
Game theorists will notice that the bad news can still be inferred. If the host does not follow up then you learn that you were not invited. But the beauty if this system is that it is never common knowledge. The host never knows with certainty that you know about the party you weren’t invited to. You know about the party but you know that the host does not know that you know, etc… This higher-order uncertainty goes a long way in alleviating the awkwardness.
More generally there is value in social conventions that allow non-public communication: exchange of information, especially bad news, without making that information common knowledge.
Younger siblings are said to be more prone to risky behaviors than their elders. This usually means stuff like drugs and sex, but now it means stealing bases:
For more than 90 percent of sibling pairs who had played in the major leagues throughout baseball’s long recorded history, including Joe and Dom DiMaggio and Cal and Billy Ripken, the younger brother (regardless of overall talent) tried to steal more often than his older brother.
Cap tap: Ron Siegel.
Via kottke, an argument against children’s menus in restaurants:
Nicola Marzovilla runs a business, so when a client at his Gramercy Park restaurant, I Trulli, asks for a children’s menu, he does not say what he really thinks. What he says is, “I’m sure we can find something on the menu your child will like.” What he thinks is, “Children’s menus are the death of civilization.”
I would guess that many parents would appreciate the removal of the child’s menus even if they aren’t worried about its implications for the fate of civilization. At home the kids know what’s in the pantry and if one of the parents is not prepared to make the children starve, they quickly learn to gag and choke on the fava beans to get to the mac-n-cheese (organic!)
If the restaurant has no children’s menu then this strategy is cut from the feasible set. The parents are effectively committed to make the child starve if she tries it. With that commitment in place, the child’s best response is to find something on the menu she will like and eat it.
Yesterday’s ruling came out of an appeal on a narrow case brought by American Needle, Inc. who complained about exclusive licensing of apparel/logos to Reebok. The league formed a single entity which centralized licensing for all teams. The Supreme Court ruled that this constituted concerted action by separate profit-maximizing entities and therefore falls under the purview of Section 1 of Sherman Act.
Here are the main points from the decision, which is an interesting read.
- The ruling suggests a broader scope than just licensing. The court notes that teams compete with one another not for just apparel sales but for gate receipts, to attract fans and managerial and player personnel.
- Rule of reason is suggested for determining which cooperative activities are permissible and which are not.
- For consideration of any activity, whether or not the teams should be considered competitors will be based not on legalistic distinctions like whatever contracts are in place. Instead the judgment is made on the basis of “a functional consideration of how they actually operate.”
Its easy to interpret these as opening the door to challenges to the systems of collective bargaining in place in all professional sports leagues.
As my wife will tell you, I hate clutter. Stuff that’s lying around I either put to use or throw away. Stray thoughts get the treatment today.
- Have the wasps in my neighborhood learned that the smell of citronella is actually a surefire signal that there’s something good nearby?
- I thank mother Earth for her two hemispheres as I enjoy this persimmon from Chile.
- Can the drunks’ favorite poker game, Indian, be solved like the dirty faces or other those common-knowledge puzzles?
- Classical field theory is doing physics by revealed preference.
- The reason it is so boring watching the Williams’ sisters in a grand slam final is that you either like both or hate both. Either way there’s nothing to root for.
- Is it pure coincidence that the Risk, Uncertainty and Decision Conference is on the exact same day as the Behavioral Economics Summer School two years in a row?
- Johnny Rotten is the perfection of Bob Dylan’s vocal style.
- How well do prediction markets forecast American Idol winners? Completely decentralized information, short time-horizon, shouldn’t this be an ideal test case?
I blogged about this before and in honor of the start of the French Open I gave it some thought again and here are two ideas.
Deuce. Each game is a race to 4 points. (And if you are British 4 = 50.) But you have to win by 2. Conditional on reaching a 3-3 game, the deuce scoring system helps the stronger player by comparison to a flat race to 4. In fact, if being a stronger player means you have a higher probability of winning each point then any scoring system in which you have to win by n is better for the stonger player than the system where you only have to win by n-1.
You can think about a random walk, starting at zero (deuce) with a larger probability of moving up than down, and consider the event that it reaches n or -n. The relative likelihood of hitting n before -n is increasing in n.
This is confounded by the fact that the server has an advantage even if he is the weaker player. But it will average out across service-games.
Grouping scoring into games and sets. Suppose that being a stronger player means that you are better at winning the crucial points. Then grouped scoring makes it clear which are the crucial points. To take an extreme example, suppose that the stronger player has one freebie: in any match he can pick one point and win that point for sure.
In a flat (ungrouped) scoring system, all points are equal and it doesn’t matter where you spend the freebie. And it doesn’t change your chance of winning by very much. But in grouped scoring you can use your freebie at game- or set-point. And this has a big impact on your winning probability.
Conjecture: freebies will be optimally used when you are game- or set-point down, not when it is set-point in your favor. My reasoning is that if you save your freebie when you have set-point, you will still win the set with high probability (especially because of deuce.) If you switch to using it when you are set-point down, its going to make a difference in the cases when there is a reversal. Since you are the stronger player and you win each point with higher probability, the reversals in your favor have higher probability.
Any thoughts on the conjecture? It should have implications for data. The stronger players do better when they are ad-down then when they have the ad. And across matches, their superiority over weaker players is exaggerated in the ad-down points.
My French Open forecast: This could be the year when we have a really interesting Federer-Nadal final.
Rand Paul, referring to criticism of BP’s handling of the oil spill says
“What I don’t like from the president’s administration is this sort of, ‘I’ll put my boot heel on the throat of BP,'” Paul said in an interview withABC’s “Good Morning America.” “I think that sounds really un-American in his criticism of business.”
“And I think it’s part of this sort of blame-game society in the sense that it’s always got to be somebody’s fault instead of the fact that maybe sometimes accidents happen,” Paul said.
This is symptomatic of the perennial time-inconsistency problem that comes with incentives for good behavior. The incentives are structured so that when bad outcomes occur, BP will be punished. If the incentive scheme works then BP acts in good faith and then it is true that bad outcomes are just accidents. The problem is that when the accidents happen it is true that BP was acting in good faith and so they don’t deserve punishment. And if doling out the punishment requires political will then the political will is not there. After all, who is going to stand up and demand that BP be punished for an accident?
This is the unraveling of incentives. Because the incentive worked only because BP expected to get punished whether or not it was an accident. To prevent this, it is the politician’s job to stir up outrage, justified or not, in order to reignite the political will to dole out the punishment. The blame game is a valuable social convention whether or not you believe there is someone to blame.
1. Is David Cameron posher than Nick Clegg? Choice quote:
“David Cameron is Eton-Oxford-country- clubby-cutglass-shooting party sort of posh, whereas Nick Clegg is Westminster-Cambridge- metropolitan-foreign-glottalstop-trustfund sort of posh. Cameron is upper-upper-middle class with a dash of English gentry, but Clegg is middle-upper-middle class with a hint of European aristocracy.”
2. What does the future hold for your lying toddler?
3. What do Buzz Aldrin and Leon Panetta have in common?
4. Brookline-Palestine beer connection.
Answer: only if it’s good economic theory.
Any theory, not just economics has this structure: I assume A, I conclude C. It’s a good theory only if A logically implies C. And if A implies C then assuming A entails assuming C. Observations:
- If someone is not assuming their conclusion then you should ask them to come up with a better theory.
- Assuming your conclusions is a necessary condition for a good theory. It is not sufficient: it is possible (typical?) to assume your conclusion but have a bad theory.
- Once we have established that C follows from A, we can do the real work of evaluating a theory: assessing whether we believe A.
- That is the beauty of economic theory and other parts of the social sciences where we assume our conclusions: you get to see exactly what to focus on in trying to evaluate the theory. A theorist’s job is to take an argument and decompose it into two parts: the rules of logic and the assumptions. You can save your time not trying to evaluate the first part because you know in advance how logic works. We put in the hard work of separating that out so that you can see what’s left to argue about.
- There is no point in trying to figure out if someone has “predetermined their conclusion and picked assumptions that imply it.” The timing of how the theory came into existence is irrelevant. If it is a good theory and the theorist assumed his conclusion then you get to see exactly what assumptions led him to it. You get to decide whether you agree with C by deciding whether you accept A. And you are given a roadmap for how to convince the theorist he is wrong.
- In fact, given that we all have predetermined conclusions I would rather argue with someone who makes up a set of assumptions that imply his predetermined conclusion than someone who doesn’t. The first is doing the honorable thing of setting out conditions under which he can be proven wrong. There is no way to get started debating with the second person.
Sandeep and I are very close to finishing a first draft of our paper on torture. As I was working on it today, I came up with a simple three-paragraph summary of the model and some results. Here it is.
A number of strategic considerations play a central role in shaping the equilibrium. First, the rate at which the agent can be induced to reveal information is limited by the severity of the threat. If the principal demands too much information in a given period then the agent will prefer to resist and succumb to torture. Second, as soon as the victim reveals that he is informed by yielding to the principal’s demand, he will subsequently be forced to reveal the maximum given the amount of time remaining. This makes it costly for the victim to concede and makes the alternative of resisting torture more attractive. Thus, in order for the victim to be willing to concede the principal must also torture a resistant suspect, in particular an uninformed suspect, until the very end. Finally, in order to maintain principal’s incentive to continue torturing a resistant victim the informed victim must, with positive probability, wait any number of periods before making his first concession.
These features combine to give a sharp characterization of the value of torture and the way in which it unfolds. Because concessions are gradual and torture cannot stop once it begins, the principal waits until very close to the terminal date before even beginning to torture. Starting much earlier would require torturing an uninformed victim for many periods in return for only a small increase in the amount of information extracted from the informed. In fact we show that the principal starts to torture only after the game has reached the ticking time-bomb phase: the point in time after which the deadline becomes a binding constraint on the amount of information the victim can be induced to reveal. This limit on the duration of torture also limits the value of torture for the principal.
Because the principal must be willing to torture in every period, the informed victim concession probability in any given period is bounded, and this also bounds the principal’s payoff. In fact we obtain a strict upper bound on the principal’s equilibrium payoff by considering an alternative problem in which the victim’s concession probability is maximal subject to this incentive constraint. This bound turns out to be useful for a number of results. For example the bound enables us to derive an upper bound on the number of periods of torture that is independent of the total amount of information available. We use this result to show that the value of torture shrinks to zero when the period length, i.e. the time interval between torture decisions, shortens. In addition it implies that laws preventing indefinite detention of terrorist suspects entail no compromise in terms of the value of information that could be extracted in the intervening time.
Your Chair emails the entire Department. She is desperate because no-one has signed up to attend a boring but important weekend event. If you decide you can suffer the complaints of your spouse and children for bailing on them on a Saturday, should you hit “reply” or “reply all” on your response to the Chair?
A preliminary analysis indicates that “reply all” is the best option. First, you signal to the Department what a great public good provider you are, embellishing your image (and self-image?) as the Mahatma Gandhi-esque figure in the Department. People will look up to you and treat you with respect. Second, maybe you can guilt others into attending the event. You have made a sacrifice after all and maybe they will feel compelled to as well. So, all in all, “reply all” is looking pretty good as an optimal strategy.
But wait – you are signaling on multiple dimensions using one signal. “Reply all” signals you have gone through the rather than vulgar and manipulative analysis in the previous paragraph. A truly altruistic person would have signed up already without all the hot air you are blowing out of your email account. So, you’re probably not altruistic. In fact, you might be devious b’stard hoping to get out of serious public good provision in the future by investing one afternoon of work now. If people make this inference, hitting “reply all” is a mistake.
With all this agonizing, research is not getting done and the web is not getting surfed. Just randomize your choice whatever email arrives. Sometimes you’ll look good, sometimes not so good but people will be confused – maybe you are an altruistic after all as altruists do not email strategically. Then, you can cash in your reputation on a serious decision when it really matters not waste it on a trivial one.
(Hat Tip: Loosely based on Stephen Morris’s paper on Political Correctness)
He is the author who wrote this on his website:
Q. How can I get Neil Gaiman to make an appearance at my school/convention/event?
A. Contact Lisa Bransdorf at the Greater Talent Network. Tell her you want Neil to appear somewhere. Have her tell you how much it costs. Have her say it again in case you misheard it the first time. Tell her you could get Bill Clinton for that money. Have her tell you that you couldn’t even get ten minutes of Bill Clinton for that money but it’s true, he’s not cheap.On the other hand, I’m really busy, and I ought to be writing, so pricing appearances somewhere between ridiculously high and obscenely high helps to discourage most of the people who want me to come and talk to them.
He’s busy, for sure. Too busy to agree to every appearance request. And so he does need to discourage people who want him to come and talk to them. But does he have to use high prices to discourage them? He could always just decide how many appearances he is able to fit into his busy schedule and agree to that many, saying no to everybody else. No need for prices if he is just rationing his time.
But maybe he wants to make sure that his scarce time is allocated to the audiences that value it the most. That’s not greed, that’s efficiency. Then instead of rationing by saying no, he should hold an auction. He chooses the same number of appearances as in the rationing mechanism (just based on the cost of his time), but now those appearances go to the highest bidders.
But maybe his optimal quantity of appearances cannot be determined independently of demand. If the auction fetches a very high price then he knows that the marginal willingness to pay is much higher than his marginal opportunity cost and he should increase supply. As a result his marginal opportunity cost increases until it rises above willingness to pay and he stops there. Now he is even more busy. But that’s efficient. And the price is lower.
But opportunity cost is a slippery concept. Agreeing to additional appearances means lower prices. The lower price is therefore an opportunity cost of the marginal appearance. When Neil Gaiman takes this into account, equating his marginal opportunity costs to marginal willingness to pay means raising prices. Now that’s greedy. But on the other hand any way of increasing consumer surplus necessarily lowers Neil Gaiman’s profits, so its also (Pareto) efficient.
If doctors were to fine tune their prescriptions to take maximal advantage of the placebo effect, what would they do? It’s hard to answer this question even with existing data on the strength of the placebo effect because beliefs, presumably the key to the placebo effect, would adjust if placebo prescription were widespread.
Indeed, over the weekend I saw a paper presented by Emir Kamenica which strongly suggests that equilibrium beliefs matter for placebos. In an experiment on the effectiveness of anti-histamines, some subjects were shown drug ads at the same time they took the drug. The ads had an impact on the effectiveness of the drug but only for subjects with less prior experience with the same drug. The suggestion is that those with prior experience have already reached their equilibrium placebo effect. (It appears that the paper is not yet available for download.)
So we need a model of the placebo effect in equilibrium. Suppose that patients get a placebo a fraction 
This equilibrium condition implicitly defines a function
The benefit of the model is that it allows us to notice something that may not have been obvious before. If instead of using placebos by varying 
as the equilibrium condition which defines effectiveness 
The something to notice is that, if the function 
Now this is just a statement about the feasible set. The benefit of placebo may come from the ability to implement the same outcome but with lower cost. In terms of the model this would occur if the 
The second-closest gas station to our current apartment was place of employment for one of the men arrested by the F.B.I. last week.
1. Before the election the LibDems prepared
“for various contingencies using the principles of game theory developed by the Nobel prize-winning mathematician John Nash and regularly employed by the CIA.
This technique, where “mind trees” outlining various scenarios are drawn on whiteboards, was used by Vince Cable for many years when he was chief economist at Shell. Together with Chris Huhne, then a City analyst, they mapped out possible scenarios concerning political stability in Nigeria and the future of Norway’s regulatory framework.”
While their policies are closer to Labour:
“the top of the party is also united in its belief that they must remain “equidistant” from both Labour and the Tories in order to maximise their negotiating hand in the event of a hung Parliament.
They recognise, for instance, that it would be “suicide” for the party if it kept Gordon Brown in Number 10 in the event that the Conservatives emerge as the largest party.”
Since this article was published in the Guardian well before the election, Labour could have “war-gamed” their response. I guess they did not as suggested by –
2. Andrew Adonis of the Labour negotiating team who complains that the LibDems overtures were
“an attempt by the Lib Dem leadership to conduct a dutch auction, inviting Labour to outbid the Tories on a shopping list of demands.”
These stories and the an analysis of what the electoral reform under consideration would have meant for the last election can be found in an excellent NYT blog post.
Cheap Talk 
