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I really love questions like this. The insight obtained from from comparing the computer-like rationality to what would happen in the real world is truly fasci

by robzyb 11y ago

I really love questions like this. The insight obtained from from comparing the computer-like rationality to what would happen in the real world is truly fascinating to me. Also, your example of Bob negotiating fits in very well with the theoretical computer-like rationality. Alice's offer of 1c is equivalent to an offer of 0c nominal in the hypothetical case. The real-life 40% is more a commentary of utility of money as opposed to decision making. I think that you're conflating concepts.

aakilfernandes 11y ago
I should rephrase. I hate it from an interview-question point of view. I like it from an insight point of view.
resu_nimda 11y ago
What are some such insights to be gained from the pirate example? What did we learn? How a set of "rational" computers might play out this scenario? How do we apply that to our decision making? These questions might seem obtuse or questioning the value of game theory, but I'm just having a hard time understanding what to take from it. The real-life 40% is more a commentary of utility of money as opposed to decision making. Only real-life humans make decisions though. If there is no implied utility of money then Bob might as well reject all offers. And it does seem that the only important question is "what would real humans do?" We can set up a simulation that strictly adheres to a simple set of rules and watch how it plays out, but what is that telling us?
- bduerst 11y ago
  Game theory is often used as a guiding principle in human negotiations, but as you say, there is never a truly isolated system when it comes to people in real world situations. Good negotiators are cognizant of this.
- the_af 11y ago
  > What are some such insights to be gained from the pirate example? What did we learn? It's a logic puzzle. We learned that the intuitive solution of having the first proposal be "I don't want any money, I just want to live" is too conservative, and that there is a way better solution for the first pirate. We didn't gain any deep insight in how to split money between real people, since those cases seldom involve pure, unemotional logic.
Dr_tldr 11y ago
I think what game theory could use is a little bit of the concept of price-of-entry into a new market, Ie, doing something at a loss now in order to generate profit later. This is similar but not exactly the same as the idea of a loss-leader. What a lot of classic game theory is missing is the idea of a feedback-loop. In a game where "Bob" is continually offered one cent, if he burns the other player who is trying to get the other 99 cents, he's signaling that they'll have to cut him a better deal. The other player would be irrational to continue offering the 99/1 split after it had been previously rejected. For the other player, even (especially!) if it's a computer, the rational choice is to keep upping Bob's percentage until it finds a number he'll accept. So you're right that 40% only speaks to a specific utility, but in any case, the only rational number is whatever number Bob (and the first player) will accept.

by robzyb 11y ago

aakilfernandes 11y ago

I should rephrase. I hate it from an interview-question point of view. I like it from an insight point of view.

resu_nimda 11y ago

What are some such insights to be gained from the pirate example? What did we learn? How a set of "rational" computers might play out this scenario? How do we apply that to our decision making? These questions might seem obtuse or questioning the value of game theory, but I'm just having a hard time understanding what to take from it. The real-life 40% is more a commentary of utility of money as opposed to decision making. Only real-life humans make decisions though. If there is no implied utility of money then Bob might as well reject all offers. And it does seem that the only important question is "what would real humans do?" We can set up a simulation that strictly adheres to a simple set of rules and watch how it plays out, but what is that telling us?

bduerst 11y ago
Game theory is often used as a guiding principle in human negotiations, but as you say, there is never a truly isolated system when it comes to people in real world situations. Good negotiators are cognizant of this.
the_af 11y ago
> What are some such insights to be gained from the pirate example? What did we learn? It's a logic puzzle. We learned that the intuitive solution of having the first proposal be "I don't want any money, I just want to live" is too conservative, and that there is a way better solution for the first pirate. We didn't gain any deep insight in how to split money between real people, since those cases seldom involve pure, unemotional logic.

Dr_tldr 11y ago

I think what game theory could use is a little bit of the concept of price-of-entry into a new market, Ie, doing something at a loss now in order to generate profit later. This is similar but not exactly the same as the idea of a loss-leader. What a lot of classic game theory is missing is the idea of a feedback-loop. In a game where "Bob" is continually offered one cent, if he burns the other player who is trying to get the other 99 cents, he's signaling that they'll have to cut him a better deal. The other player would be irrational to continue offering the 99/1 split after it had been previously rejected. For the other player, even (especially!) if it's a computer, the rational choice is to keep upping Bob's percentage until it finds a number he'll accept. So you're right that 40% only speaks to a specific utility, but in any case, the only rational number is whatever number Bob (and the first player) will accept.