The continued misuse of the Prisoner's Dilemma

EDIT: as suggested I have turned most of this comment, somewhat expanded, into a post.

The entire point of experiential learning, which is what you set up to happen when you have students play a game - as opposed to telling them about a game - is that there is no "right" or "wrong" lesson to be taken from it.

...see linked post for fuller argument...

If Hamermesh is to be faulted for something, it is for (apparently) imposing on the students his own conclusions from a given outcome, as opposed to letting the students figure out for themselves what the outcome means.

Wait, you mean he let them conspire and they didn't set up explicit [monetary] penalties for breaking the agreement? Everybody fails.

I have been in Ashley's situation - roped in to play a similar parlour game to demonstrate game theory in action.

In my case it was in a work setting: part of a two day brainstorming / team building boondongle.

In my game there were five tables each with eight people, all playing the same, iterarted game.

In four out of five table every single person cooperated in every single iteration - including the first and last one. On the fifth table they got confused about the rules.

The reason for the behaviour was clear - the purpose of the game was to demonstrate that cooperation increased the total size of the pot (the game was structered that way). In a workplace setting the prize was to win the approbation of the trainers and managers, by demonstrating that we were teamplayers, and certainly NOT to be the asshole who cheated his tablemates and walked off with $50.

On the the fifth table they managed to confuse themselves such that on the first iteration two of them unwittingly defected. Their table therefore ended up with the least money, but the two individuals of course ended up the richest in the room - they were hideously embarrassed.

I was left wondering what amount of money it would have taken to change behaviour. Would people defect if there was $1000 at stake? In that setting, I think still not. $10,000? $100,000 ?

Practical game-theory experiments would be quite expensive to run, I think.

Ultimately, the students learned the wrong lesson from an unrealistic game.

Alternately, they learned more about finding the balance between maintaining peer alliances and gaining the favour of the ruler (guessing the teacher's password). This is the very essence of the courtier. Even if the students don't fully comprehend that message I am confident that their intuitions are lapping it up.

On a note more explicitly related to economics they gained insight into using anti-competitive practices needed to get ahead (in this case public shaming) while avoiding crossing the line that triggers adverse social sanction (professorial intervention.)

Whichever way you look at it, Ashley won this game. Of course, many other students with less aggressive or less aware professors have lost by taking the same actions. Including some in classes which I have attended!

I think it's odd that he would say that only Ashley understood the game, not because she may actually be the loser in the wider scheme of things, but because the relevance of the Prisoner's Dilemma is that is actually supposed to be a dilemma. His saying only her action showed understanding suggests he doesn't think it's a real dilemma at all. He thinks it's a question with an answer: defect.

As a group, they'd get more money appointing just one person to bid $0.01, and splitting it after the fact.

You're calling out the professor for not addressing the larger game of "life" but this post itself seems to be denying Ashley the opportunity to play the larger game of life at all.

For example, Ashley's demonstration also surely had some gross, if not necessarily net, benefit to her reputation - she showed everyone she is clever, that she can get the approval of the professor, etc.

Ashley may have left class and spent $17.45 neutralizing those hits to her reputation (distribute the money after class, buy everyone a beer, etc.). She would have netted $0.01 more doing this than cooperating.

You're letting Ashley accrue costs in the larger game, but not letting her accrue benefit in the larger game, which doesn't seem fair to Ashley or Hamermesh.

This professor, who has no doubt debated game theory with many other professors and countless students making all kinds of objections, gets three paragraphs in this article to make a point. Based on this, you figure that the very simple objection that you're making is news to him?

One thing that concerns me about LW is that it often seems to operate in a vacuum, disconnected from mainstream discourse.

I probably came off as more "anticapitalist" or "collectivist" than I really am, but the point is important: betraying your partners has long-term consequences which aren't apparent when you only look at the narrow version of this game.

This is actually the real meaning of "selfishness." It is in my own best interest to do things for the community.

The mantras of collectivists and anti-capitalists seem to either not realize or ignore the fact that greedy people aren't really doing things in their own best interest if they are making enemies in the process.

I had my intro Ethics students play an anonymous Prisoner's Dilemma with candy earlier this week - two one-shot, one iterated thrice. Although they didn't know who their own partners were, I had no good way to conceal who got no candy because someone had defected to their cooperation, who walked away with ten pieces looking smug, who had to settle for two, and who got five for mutual cooperation. This didn't appear to influence their behavior at all - actually, apart from the one star student who chose to attend that day and some of the people who managed consistent cooperation during the iteration, none of them looked like they had much of a strategy, even though most of them seemed motivated by the candy. I guess $20 is a larger payoff than the amounts of candy I was working with, but this being a game and the payoffs coming from without (i.e. they aren't managing resources they already have, but negotiating the split of a non-player's donation), it doesn't seem likely that there would be too much long-term animosity over it except in choosing how to behave with future games of the same type.

I read the article, also. The description of the game was a bit short and somewhat ambiguous.

The game is designed to show people who participate why it is hard to maintain collusion or price fixing amongst oligopolies, secret agreements are not enough. It was a good demonstration of the difficulties in maintaining a secret deal. Far better than simply reading about it.

A number of theorists think that price fixing is mystery because the economics of it should make any agreements disappear.

However, there are price fixings in the real world which are regularly prosecuted. So, how are the Ashley's dealt with by those groups?

"I probably came off as more "anticapitalist" or "collectivist" than I really am"

There is most certainly nothing anti-capitalist about creating and maintaining a reputation for cooperation. Who would loan you money or send you goods without payment if you have a reputation for defecting?

When you write "If the others continue to cooperate, their bid is lower and they get nothing" you imply an iterated game. It seems clear from Hamermesh's account that players were only allowed to submit one bid.

Ashley won, but she didn't maximize her win. The smartest thing to do would be to agree to collude, bid higher, and then divide the winnings equally anyway. Everyone gets the same payout, but only Ashley would get the satisfaction of winning. And if someone else bids higher, she's no longer the sole defector, which is socially significant. And, of course, $20 is really not a significant enough sum to play hardball for.

Silas, well said. I note that Bob Murphy has linked to this post.

BTW, while I agree that Hamermesh's experiment showed the difficulty of collusion in a free market, I doubt that was his intended "point".

Regards,

Tom

You aren't saying anything here that Hamermesh isn't well aware of. He is teaching models, and models are simplifications of the world.

I read the article, and thought much the same thing. Ashley may be up financially, but down socially.

This is not Prisoner’s Dilemma. The original has no reputation effects. http://en.wikipedia.org/wiki/Prisoner’s_dilemma

This was a game in a game theory class. As so the teacher is trying to teach things like strategy domination, ect. In this case I believe he was applauding Ashley because she understood that a bid of .01 was weekly dominated by all other bids; that all other bids yield as good or better results.

Was it a bad idea for her to show herself as a “selfish git”? I don’t know that depends on the social situation. My guess is that folks in a game theory class get that this is a game.

See Yale open course on game theory for background: http://oyc.yale.edu/economics/game-theory/

On a side note if you want to take reputation into consideration consider the iterated prisoner's dilemma. Computer science classes commonly do this early on as a fun way of getting kids to create data structures capable of remembering who ripped them off.

In the experiment you trade with you classmates $1. If you both are honest you get back $1.1. If one cheats and the other does not they get $2. If both cheat they get $1. If someone cheats you most program that they cheat that person from then onward.

When the students don’t know how many trades the program will be run for the honest traders do best.

On the topic of "utilities in the prisoner dilemma coinciding with jailtime" I quote one of my guest blog posts: http://phd.kt.pri.ee/2009/01/27/the-real-prisoner-dilemma/

Two hardened criminals are taken to interrogation in separate cells. They are offered the usual deal: If neither confesses, both get one year probation. If both confess, both do 5 years in jail. If one confesses, he goes free but the other does 10 years hard time.

Here’s what actually goes through their minds: “Okay, if neither of us confesses, we have to go back to the real world. But its so hard there! But if I confess, he will kill me when he gets out.. so thats bad… If both of us confess, then we can just get back to jail and continue our lives!”

Lateral thinking, people ;)