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game theory and fairness.
- 수요일, 5월 04, 2011 -

So. I have been keeping mum about my opinions regarding random issues and since I'm working on a paper that seems to tie several of what I have learnt or gleaned over the past few months, maybe this can help me crystallize my thoughts better.

In game theory, we have rational players who interact in various scenarios and play their best strategies given what they understand or believe the other(s) is(are) playing. So there is this game, call the ultimatum game. The most common version of this game has two players. The first player, the proposer, will be given a sum of money to split and he can decide how much to offer the second player, the recipient. The recipient can choose to accept or reject the split. If he rejects the split, nobody gets any money. Game theory predicts that the recipient would accept any amount, after all, something is better than nothing right? So by right, if the proposer offers the lowest possible amount to the recipient, e.g. 1 cent, the recipient should accept. This is the so-called Nash Equilibrium. Interestingly, when this game is played with REAL people, and not textbook players, the recipients tend to reject splits that they think are unfair. So if they get 20% of the sum of money, they REJECT about half the time. That is, if the proposer is to split $20, and he offers the recipient $4 out of the $20, the recipient rejects. Why? Isn't $4 better than $0? Even more interesting, is that people who were acting as the proposers in those experiments, also SEEM TO know how to play fair, and they tend to offer 50/50 splits.

Science then goes on to attempt to explain this cooperativity, altruism and fairness in human as a kind of evolutionary preserved trait, which is what I'm trying to wrap my head around.

In any case, since the concept of fairness is so entrenched in us social beings, it is not surprising that Sg-eans are upset about certain political decisions by a certain political party that attempts to forestall any upgrading work etc etc in certain wards that continue to boycott the party, or that most of the people in that party receives pay thats about the 4 months' pay of an average Sg-ean. How can that be fair right? I'm working hard, you are pledged in to work for me, and you get much more money than I do. On top of that, the money you get, seems to be from my pocket too! And and and.... my house is not upgraded with the money I get! And you expect me to vote for you? UNFAIR!

So should the party switched his tactic and stop dangling the carrot, seeing that the mere act of dangling a carrot is unfair?
Well. Let's recreate this situation as a game. There is no sum of money to split, so this is not an ultimatum game.

You have player 1 as a certain political party, and you have player 2 as the mob in a certain GRC. - remember this game is simulating the NOW period, after player 2 has been very displeased for a very long time.

Player 1 much prefers to stay in power, and to garner as many votes as possible, of course the votes from THAT certain GRC aren't that important, but if they get it, it would make winning all the more sweeter.

Player 2 much prefers a more developed neighborhood, less taxes on his hard-earned money, lower cost of living and basically all-around happiness.

Player 1 has two actions: Dangle a carrot, or NOT dangle a carrot.

Player 2 also has two actions: vote for Player 1, NOT vote for Player 1.

Given the preferences, and given the displeasure of Player 2, Player 2 will not vote for Player 1 as Player 1 has displayed arrogance and unfairness, signs that Player 2 cannot make friends with Player 1.

Given the dominant strategy of Player 2, Player 1 has nothing to lose anyway - he could still try to show off his power and dangle the carrot in the possible event that Player 2 would turn 'rational' (in game theory talk) and vote for Player 1 so as to preserve his self interest and receive a more developed neighborhood. In any case, other than dangling a carrot, Player 1 would have no other better deals to offer Player 2, so Player 1 has a dominant strategy to dangle a carrot too.

So you see. A lose-lose situation. This is not an ultimatum game. This is a prisoner's dilemma. They could both have a much better outcome, if they both agree implicitly that Player 1 would be voted in, and Player 1 would not make upgrading a conditional outcome. But most of the time in reality, its usually too late to change what could be changed way earlier.
Guerrilla tactics do not work when everyone's comfortable and asking for MORE. Unfairness wouldn't have matter as much if everyone is starving, any scraps of food would be sufficient.
My take on this - I can be rational, but I am a human too. Go figure.

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