Sequential Moves in Diplomacy - US v North Korea

Here is the decision tree for the sequential move game of nuclear deterrence. Some assumptions: North Korea's preference is to maximize the amount of economic aid it receives which is followed by going forward with the development of weapons. The US would prefer that North Korea stop development. The problem then is to determine the amount of economic aid to give.

Frozen Concentrated Orange Juice Futures - Zero Sum Games for the Ages

Two Zero Sum Games from the movie Trading Places:

The first - The Duke brothers, Randolph and Mortimer, on a bet to decide the age old question of nurture or nature, decide to switch the lives of a young, successful commodity trader, Louis Winthorpe III, with the life of street vagrant, petty criminal Billy Ray Valentine.  Much to the delight of Randolph Duke, the switch couldn't have been a bigger success.  Louis ends up destitute, unemployed and living with a prostitute, while Billy Ray, now known as William, has become a successful and honest trader.  So there is the first part of the zero sum game - one person became one of life's winners and the other one of life's many losers.

The Second - Louis and Billy Ray become aware of this game that was played by the Duke brothers and decide to turn the tables. The Duke brothers plan to obtain the forthcoming orange crop report - a report that will decide the prices of FCOJ in the coming year. Louis and Billy Ray intercept the crop report and replace it with a phony giving the Duke brothers the wrong information. So before the real crop report is made public the Duke Brothers buy like crazy driving up the price, while Louis and Billy Ray begin to short sell FCOJ contracts. While the trading is in session the crop report is released and the Duke brothers realize they've made a mistake. The new information is out, prices go down and Louis and Billy Ray begin covering their short positions. End of the Day, margin calls and Randy and Morty and now dead broke while Louis and Billy Ray made a fortune.

Errol Morris and Marc Hauser discuss Game Theory

In Seed Magazine, legendary documentary filmmaker Errol Morris and psychologist Marc Hauser (himself a legend in some circles) discuss the ultimatum game - the one shot, take it or leave it $20 split game.

Seed Magazine interview with Errol Morris and Marc Hauser

MH: This is a one-shot game. On the rational economics view, I should be giving you the smallest proportion of the pot possible. You should accept anything because something’s better than nothing, right? But it turns out that most people offer about half, so about $5. And for people who offer less, usually in the range of $1 to $3, the recipient rejects. So there’s some notion of fairness, which overrides the selfishness we expect. What would we think of ourselves if we offered so little? How would the recipient perceive that kind of offer? So this all plays into the view that the mind evolved with these regulatory mechanisms that counterbalance complete self-interest?

MH: What’s the intuition?

EM: The intuition? To make a crude generalization: In game theory you make a series of calculations. I need to appear generous or fair to ensure that the people around me will be more generous or fair. And so on and so forth. It assumes that people effectively communicate with each other.

EM: Well, very often it seems to me that in trying to analyze human behavior, people create these simplistic games or models that they feel will teach them something. But in real life, you’re plunged into the middle of a confusing, uncertain nightmare.

Morris seems to have a negative view about game theory put into application - that you can't apply a "simple game" to model a real world situation because of the inherent difficulties of applying something simple to the complex. However, he does make an excellent point about one of the rules of game theory - that both players are "effectively communicating with each other."  I think this is very good observation - if a "game" is being played, there is an assumption that both sides understand what is happening.  I think what Morris is saying is that it is very rarely the case when both sides of a game are playing by the same rules or even have the same objectives, etc.

Prisoner's Dilemma in Copenhagen

The climate change talks in Copenhagen will change the way some governments decide to handle carbon emissions. The challenge isn't convincing those in attendance of how real climate change is, despite the climate-gate email saga, the science is pretty much established as fact. The problem will be convincing the developing world (China and India) to adopt the same changes and set limits on their economic development. The prisoner's dilemma is this:




Everyone agrees to a standard, indeed there is consensus that most think it's a commendable idea.

A coalition of countries is formed, but one country (perhaps feeling the need to improve economic conditions) soon realize there is greater economic gains to be had in the short-run if it scales back the implemented standard - giving that country a slight edge over those who are still coordinating efforts to lower carbon emissions. However, once one country pulls back, the rest are likely to follow suit. The worst case scenario is that everyone reverts to pre-Copenhagen standards. So instead of having a regulated emission output throughout the world, some countries will have no economic incentive to follow any protocol.

Atlanta Mayoral Race - two voting systems two winners

Mary Norwood has officially conceded the Atlanta mayoral race after runoff with Kasim Reed. Norwood won a majority of the vote after the general election, and the outcome was in order:


Norwood - 43%

Reed - 38%

Borders - 19%



But because Atlanta uses a majority 50 + 1 voting scheme in elections, simply getting a plurality of the vote doesn't do trick. Had there been a plurality rule, Norwood would be mayor. After Borders conceded and endorsed Reed, it was over for Norwood. Over 70% of Borders voters switched to Reed in the runoff election giving him the advantage. This being the case, the need for a separate runoff election weeks later could have been avoided if a single transferable vote or an approval voting scheme was used. However, since the integrity of the vote is so important in public elections, a voting system that is well understood by all is a necessity.

Olympic Games Bidding - Winners and Losers

It has been conventional wisdom to deem the Olympics as the ultimate winner's curse.  That is, it cost more to the host city/country to put on the games than the economic benefits that are promised by the prospective bid committees.  However, this article seems to indicate otherwise:
http://www.guardian.co.uk/uk/2009/apr/14/olympic-games-economics-exports

The interesting thing is that not only do winners achieve some long-term economic and social gains, but those cities that unsuccessfully bid see a 30% increase in exports.  As was the case with the Beijing Olympics, it can be used as a signal to the world community that the country is ready to engage and is open for business.