Continued with the
Game Theory class from yesterday.
Lesson 4:-
- Penalty kick game – which is the best strategy
to shoot, to middle, left or right.
- Middle is not best response to any
belief.
- “Do not choose a strategy that is never a
Best Response to any belief”
- Partnership game (50-50 partnership, effort
put in vs return; two people sharing a room, who will cleanup)
- “Inefficiently low effort, because at
the margin I only capture ½ the benefit I put in, but I absorb all the
cost of the effort”
- Players play best response to each
other – iteratively removes the best responses
- Reaches “Nash equilibrium”
- I wonder in scenarios like this, who
will put in effort without regard to the return (returns will go to the
other person also, but effort only from one). Unless there are people who
put in effort without regard to the result, will the world reach Nash
equilibrium? Is this what is happening to scenarios like global warming (everyone
putting least effort needed since others are not doing it) and similar
scenarios where morality causes someone to put in effort and suffer for
benefit of others?
- Nash equilibrium vs just doing the work
without expecting results
- I listened to Adam Grant about Givers and Takers. I wonder if
someone evaluated the effect of Nash equilibrium in an organization where
there is an imbalance of Givers vs Takers or will that go to the
equilibrium when Givers will leave the organization frustrated about
someone is taking advantage of them until there is an equilibrium.
Lesson 5:-
- At Nash equilibrium, there are no
regrets for the players – they put just the right amount of effort which
yielded results and didn’t end up putting less effort (regret they did
less) or more effort (regret others are getting benefit).
- Self fulfilling beliefs - because I will
play my best response thinking everyone else is going to their part.
- Nash equilibrium is a different social
problem than that of prisoner’s dilemma – in prisoner’s dilemma, there was
no enforcing contract, so everyone will play the dominant strategy as
their best response. But in Nash equilibrium, Coordination/Communication
can help.
- Investment Game – only if 90% of players
invest, everyone benefits. But in examples, people abstain thinking
getting 90% is not going to happen (trust, risk aversion). If you play
this multiple times, result will converge to an equilibrium. Bank run (many
people losing trust in a bank and wanting to withdraw at the same time) is
an example.
- Nash equilibrium can be self enforcing
agreement.
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