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29 Cards in this Set

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Zero some

person A’s loss is person B’s win & person B’s win is person A’s loss


(the more the other person wins the more you lose)


Prisoner’s dilemma is not zero some if they both stay quiet but they both think it’s zero some so they talk

Follow the follower

Follow the person in lead because it is better to have the same conditions as the follower

winning streak

likely to be over-confident and focus less on getting a precise shot

Take it or leave it - what is it & what are the problems

convincing the other side you’re not going to or can’t change your situation, non-negotiable


problem - seller would know you’re an inflexible buyer & go looking for another buyer AND it doesn’t work well if there’s more than one round

simultaneous games

trying to figure out what the person is doing at the same time e.g. prisoner’s dilemma OR rock paper scissors

sequential games

e.g. boat example (follower & leader) pie game


(start at the end of the game tree and go to the start to find out best decision)

Terrorist + 400 ppl on train example

everyone can collectively take down terrorist (more rational) however everyone acts in their own rational decision (own self-interest) & don’t want to be the first casualty so they don’t

The sunk cost fallacy

already invested a huge of money on something then they decide they don’t want to stop because they already invested so much money in it


logically should leave based on future outcome


psychologically it’s difficult to stop

look before you leap

watch what you’re about to get yourself into, your slippery slope might get bigger and bigger


the first step can lead to the next moves

Difference between making a decision all at once vs one at a time

It’s dangerous to do one at a time when there are a chain of decisions that can be made


e.g. deciding on drinking one beer at a time...OR clicking snooze on your alarm in the morning


it doesn’t see like you’re drinking that much but collectively it’s a lot


individually the decision doesn’t seem bad but collectively it is irrational and has a bad result


slippery slope - making a minor action will lead to major consequences

Slippery slope fallacy

taking a minor action will lead to major consequences

collude

2 companies come to a secret understanding (conspire) e.g. both agree to set to a high price/both agree to set to a low price


colluding with another company


students can collude to not study

Dominant strategy

when regardless of what option your opposer takes, you are at a better ending than if you take the other option


e.g. prisoner’s dilemma they both have dominant strategies but it is mutually better for them to go against their dominant strategy

If you don’t have a dominant strategy you should....

you should know the other player’s dominant strategy


you can assume the player will play their dominant strategy so you will choose the best option based on the assumption that they will use that dominant strategy

Dominated strategy

If regardless of what any other players do, the strategy earns a player a smaller payoff than its other possible strategies


e.g. if you have 3 options, one of the options will/might be the worst (the worst strategy is the dominated strategy)


If the opposing player is rational they won’t choose their dominated strategy therefore you can cross off that option from your list of potential choices

equilibrium

a point where both sides agree on and reach a point that is a good option for them


e.g. one equilibrium for the prisoner’s dilemma is that they both go against


e.g. international phone call - equilibrium is that if you decide to make it so the person who picks up the phone is the person who calls once the phone cuts off RATHER THAN both trying to call each other & being unable to catch the other once the phone cuts off


e.g. one equilibrium for students (for an exam) is to not study

Scorched earth strategy

removing the incentive for the person to come take the place/thing because you’re leaving them with nothing


HAVE TO KNOW WHAT THE OPPONENT WANTS


e.g. writers all threatened to leave publishing company so that the other company doesn’t buy their company —> assuming that it is worthless to take over the publishing company if all writers/editors are gone


DOESN’T ALWAYS WORK


same happened with magazine company but the company taking over didn’t care because it just wanted the advertising section of the company & the advertisers stayed

Two minor things to break the prisoner’s dilemma

1. detect cheating


2. have a decided way to punish the cheater


e.g. in this situation there should be more than one round and the number of rounds has to remain unknown


punishment needs to be simple and clear (gives opposer the incentive to do well)


need to know the size of the punishment - smallest as possible but large enough that it only just prevents the cheating - not any larger than what is necessary to do that

What are the 8 ways of breaking the prisoner’s dilemma?

1. Establish reputation


2. Write contract


3. Cut off communication


4. Burn your bridges


5. Leave the outcome to chance


6. Move in small steps


7. Credibility through teamwork


8. Use mandated negotiating agents

Establish reputation


(to break prisoner’s dilemma)

Always do what you say you will do - e.g. will form track record of always going through with what you say you will do


unpredictable - convince the other side that you are unpredictable (can give you ADVANTAGE because the opponent will be scared)

Tit-for-tat

Trust at the beginning, both cooperate, if component cooperates you do too BUT the moment the opponent doesn’t cooperate then you don’t, but if the opponent cooperates again then you do too


- you switch and mirror their behaviour


on any five game the strategy didn’t win, always one move behind the opponent


overall the best in consistency


PROBLEM: can get stuck in the loop e.g. both doing the same strategy OR if there is a misunderstanding (think bf chested so you cheat but they didn’t but to retaliate they cheat too)


half of the time cooperating, half of the time cheating


change the criteria based on how high the stakes are


retaliate cause of pattern


the strategy doesn’t work against itself

Write contract

sign contract - binding both your hands & convince opponent that you can’t/ won’t play your dominant strategy


e.g. marriage —> show them you don’t have the ability to walk away because you signed the contract

Cut off communication

e.g. professor & his suit in Taiwan when he couldn’t speak Chinese OR a will - when you’re dead family and friends can’t communicate with you anymore OR negotiating sale price (you can’t change price) - buying online there is no line of communication because you can’t talk to the seller about the sale price

Burn your bridges

If you invest all your money into one company then your opponent will know that you have bound your hands & you will fight your hardest for it, if you didn’t do that then you have to have a backup plan of investing in other companies but if you invest your all then you can’t (you’ve burnt your bridges)

Leave the outcome to chance

e.g. Russian roulette where the 1/5 cartridges in the gun are filled with bullets but you have a 4/5 chance of not killing yourself so you you’ll take that chance

Move in small steps

we’ll pay you this amount every year, rather than once a year s.g. salary once a month rather than once a year because you’ll assume that they’ll keep paying consistently once a month

Credibility through teamwork

e.g. army fighting in battle, it’s in each of the soldier’s self interest not fight (and let the others do it for them) THEREFORE have team enforcements e.g. Romans who killed their own fighters if they didn’t go forward and fight


e.g. kamikaze soldiers - in no one’s self interest to crash their planes and kill themselves but it is in Japan’s interest as a whole

Use mandated negotiating agents

take negotiation out of your own hands and give it to them


e.g. vending machines - can’t negotiate with the vending machine (for the price) or the coke company, let the third party do it

Prisoner’s dilemma points

• Is not zero some situation if they both stay quiet but they both think it's zero some so they talk


• they both have dominant strategies but it is mutually better for them both to go against their dominant strategy


• Simultaneous game


• One Equilibrium is they both go against.