Game theory is often presented as a framework for making better, more rational decisions. I often find myself sitting down and trying to put aside my concerns and emotions and work out what the ‘correct’ most optimal response to a problem is. But while weighing the outcomes of the different options is valuable, there are often times where how I feel is just as important as how much the decisions cost. Sometimes it’s really important to me to do what seems right, what makes me happy, or what allows me to act upon my anger. We are taught that rationality means setting aside our emotions, and yet sometimes our emotions will prevail.
Not only do our emotions sometimes win over, but the way we feel has value to us. The cost of an act based on emotion can be quantified, at least within a specific case, based on what other options we are willing to forego.
Is it time to stop?
Consider for instance a situation where you are in a heated argument with a friend. You know that the conversation is leading to nowhere good, and fast. You can either break off the conversation or continue. Game theory would tell you that the further you argue, the more both of you are going to lose. Despite this, some will continue to argue. Perhaps there is something important that one feels needs to be said. Perhaps the argument is in itself the reason to damage the friendship. Or perhaps despite the desire to argue, to lash out, it is not worth the consequences. Whether one chooses to argue or not argue, it can be a rational choice. Is it worth more to vent, or is it worth more to not damage the friendship? It could also be an irrational choice, made without considering the consequences.
Let’s say your friend needs a loan for car repairs and their credit is shot. You know that there’s a chance they will never pay you back. You also know that you can get a better return on your investment elsewhere because it’s not socially acceptable to charge interest to your friends. Some people are going to offer the loan anyway. Partially because some friends and friendships are more reliable than others, but most likely because it’s a nice feeling to help someone out. At best, you lost unearned interest, at worst you lost the entire loan. A rational choice requires one to weigh these costs against the good feelings one may feel. An irrational choice is to assume the loan will be paid back, or to decide that because you can get a better return elsewhere, you should never help your friends.
Is it worth the trouble?
encourage your teammate to get the work done while keeping a calm and helpful attitude
get angry and refuse to cooperate, which makes it even more difficult for your teammate to work
Say you’re working on a project and one of your team members has been slacking off or otherwise not putting in a full effort to get their part of the project is done. You do not have the skills necessary for this part of the project. The deadline is coming up and there’s a lot of work to do. Your choices in this hypothetical situation are:
Given only these two options, we all know which one is the ‘rational’ choice and yet, we also know that sometimes people choose the second option. And we have probably all been in a special situation in which taking the second option seemed more than appropriate. Your teammate might have a completely unacceptable reason for being distracted, may not have the greatest personality, or is making unreasonable demands. In other words, you could be really angry for a very good reason, making it very hard to be helpful and calm.
The consequences of failure may also vary. Your very job may depend on its success, or it may be an unnecessary favor you were attempting to make. One must consider the stakes and how much value there is in not having to pretend to be positive. It is perfectly rational to ask oneself whether it is worth the effort. What would not be rational is to always assist your teammate, ignoring your feelings, no matter how badly they may be behaving.
Do I want to shop here anymore?
A while back, I had returned a book to Amazon and thought there was an error in their calculations of what I was owed. They did eventually correct the error, but while I was waiting for their reply to my inquiry, it occurred to me that I save so much money using Amazon over any other alternative that not only would I continue to buy from them if they do not fix this mistake, but they would have to make enough mistakes to amount to hundreds of dollars worth of… dollars, time, and/or aggravation before I would be willing to stop doing business with them.
While game theory helps me quantify my choices, it did not affect my decision. Many people keep shopping at places that have made unfortunate customer service mistakes in the past or sold products that turned out undesirable. I think that I am more willing to walk away from a company than the average person, but it’s much easier when substitutes are readily available, such as bars and restaurants.
We value how we feel. That is why we avoid doing things that make us upset and try to do things that make us happy. If we are to make truly rational decisions, then we should factor in the emotional costs and benefits as well.
For a long time, I struggled to reconcile my emotional desires with game theory. I would often turn to game theory when my emotions clouded my judgment. I’d realize that while I’d like to vent my anger, it would have a price. While I would like to do the thing that is more pleasant, there would be a cost. Then I realized that things that make me happy or sad or angry are things that give me utility. How else do I measure my want of an item if not by how happy I think it will make me, or unhappy to do without? Wanting to avoid pain is far more sensible than wanting a book.
One may wonder if this is just an excuse for bad behavior. This is not the case. No matter how angry or upset I may be, the long-term benefits in terms of goals or reputation almost always outweighs the temporary desire to act upon an emotion. When the stakes are high, one can put aside pride or indignation.
But sometimes a different response is required. My happiness has a price. My ability to vent or cope with sadness has a price. My integrity has a (very high) price. Anyone who is not a doormat has a limit. What is important is to not act as agents devoid of emotion, but to know what price we must pay for the emotion we want.
Whatever you do, make sure you know what it will cost you.
I’ve had some interesting experience with two insurance companies. I find the contrast in their business models to be quite interesting and their relative behaviors of economic note.
Insurance Company 1 was extremely professional, very polished, respectable, and downright thoughtful. When I came in for an interview, the manager had water on the table, sitting on coasters. He knew I had a bit of a hike to get there. It didn’t take long for both of us to realize that this job was not for me, but he and the front desk treated me with the utmost respect. If I ever want to buy financial services, I would go to this company.
Insurance Company 2 seemed to find things like honesty and integrity to be irrelevant criteria for picking employees and in business practices in general. They may even be a hindrance. I made the mistake of having my contact information available and I received a call, offering me an interview. The phone conversation moved very fast, and deliberately kept me off balance. Long story short, I ended up cold-calling to book interviews for a day.
The job is pretty simple. You take a stack of names and phone numbers from Monster or Craigslist etc, of all the recently updated resumes. There is absolutely no weeding or grooming. You call. You tell them you’re from the company of a very vague name and want to set up a personal interview. You put in a few questions to see if they are open to selling insurance in the most general sense. You ask a couple questions to strengthen legitimacy. You consider if they will actually show up if you book them. Most likely, you tell them they have an interview tomorrow at some specified time. Here’s the address. Dress well. Have a nice day.
So basically their job is to trick people to come in for interviews, ideally without letting on that the business has anything to do with selling insurance and that the company is interviewing tons and tons and tons of people in group interviews, anyone they can convince to show up.
The pay schedule for bookers works like this: A flat fee for every interview you book, an additional flat amount per person that actually shows up, and bonuses for the first two hires that month. They expect a certain percentage of booked individuals to actually show up to the interview.
A booker wants to hit the percentage of shows, but maximize the number of interviews booked from their pile. They want to convince as many people as they can to show up. They are not selecting for people who are best suited to the job. They aren’t looking for those who are particularly inquisitive, bright, or interested. They’re selecting for those who are either complacent or coerceable.
The strategies of these two companies couldn’t be more different than night and day. The first company while they were willing to speak to anyone, were highly selective and conveyed a sense of integrity. They are looking for people who will have faith in both the company and the product.
The second company relied on less than honest means to bring people in. Neither did the company select for integrity nor did their employees self-select for integrity. They were merely going for quantity hoping to find adequate individuals.
This same strategy applies to the lowliest individual. Bookers are not selected for their integrity. Instead, they must be tolerant of some underhanded tactics. Consequently, the managers cannot trust the bookers. No-shows may have been faked. The management does not quite endorse a sense of honesty in whom they train. I watched one say one thing, then smoothly transition into the opposite, followed by “I believe that honesty is important here.” Oh really. It’s even possible that she lied about how many people showed up. I wouldn’t normally think this, but given I was paid in cash, all the alarms were already going off. Hoo boy.
There are two kinds of salespeople: those who sell products they believe in, and those who sell products they don’t believe in. The ones that are good at selling products they believe in tend to do poorly when selling products they don’t believe in. However, they tend to do better with a product they believe in than the other kind of salesperson with the same product. The first company is looking for those salespeople who will believe in the product. The second company is looking for salespeople that can sell anything.
In the long run though, it is hard to imagine that the second company is going to survive. It’s one thing to look for salespeople who will sell things they don’t believe in. It’s another to pick only from the candidates that have been duped by the booker selling them the interview, free as it may be.
Some online gaming companies have come to realize that customer behavior impacts sales (language warning). This article discusses how the game can be engineered to discourage certain antisocial behaviors that run rampant in multiplayer games today.
I really like not only the acknowledgment that gamer culture (or lack thereof) is a turnoff for many, and that it would be economically worthwhile to do something about it.
You don’t have to let (social filter) hurt your multiplayer gameÃ¢â‚¬â„¢s popularity or sales. Social environments can be designed to minimize bad behavior. Social conflict is inevitable in online gaming — but it doesn’t have to be as frequent or severe as it is.
But if you donÃ¢â‚¬â„¢t design the social environment, your game will probably end up feeling like most do right now — like the lawless territories of the Wild West.
Censorship added by me.
It seems to me that online gaming will inevitably become more-or-less civilized, like a vast portion of the rest of the internet has become over the years.
I picked up this book expecting it to get somewhat technical about the mechanisms of the brain. However, it lacked the depth and substance I expected (in comparison to other recent popular science books). Parts of it relied upon summarizing very succinctly research findings (such as the chapter on chioce basedon Kahnaman’s work), and others seemed to lack many references at all as the author describes his theories without more than anecdotal evidence (the sort that he warns readers against).
It was nice in that it got me thinking about evolutionary effects on the brain and how different aspects might be (or appear to be) less than optimal, but the arguments were not as convincing as they could have been. Either there is more evidene from the field of psychology that the author did not bother to elaborate on and reference, or there isn’t much evidence to support his ideas at all.
It was worth reading, not so much buying.
A fun read.
This is a popular science presentation of statistics and statistical history focusing on the effects of randomness and our reactions to it. It is relevant in that many of these statistical and misinterpretive situations appear in economics and environmental science and is a very unintimidating introduction to the subject.
While the ideas in this book are not that extraordinary or revealing to anyone who’s taken a statistics class, this book shines in giving real-world examples of applications and misinterpretations. It was interesting enough to read even if there was nothing particularly new.
It is true that there have been many books on the subject, and the author goes into exceedingly thorough detail, but it’s well presented for what it is, and is far more engaging than many of its peers.
I actually hadn’t run into the Monty Hall problem until a couple weeks ago. Poor Marilyn,
It took me a while, but I finally finished this book by Nassim Taleb.
It’s a decent book about how randomness is misinterpreted and how that leads to false assumptions in the market that can ruin you. Just because the market’s been going up for the last 20 years doesn’t mean it’ll always go up.
He gets into a few non-market examples as well, like the OJ Simpson trial, and some history about behavioral economics.
However, the main reason why it took me so long to finish the book is that he is extremely arrogant and spends an incredible amount of time insulting everyone including the reader. Yes yes we bought your book sir. Hope you didn’t intend on a second round of this game.
Killing critters vs culling herbivores
Researchers looked back upon a controversial hedgehog culling
and used “content analysis”, a framework used by social scientists that basically looks at diction (vocabulary, wording). They found that different stakeholders discussed the same situation with completely different language.
“The pro-hedgehog lobby wrote about killing and animal welfare issues and used emotive or informal vocabulary, whereas the pro-bird lobby used more scientific language and vocabulary concerning wildlife and the Hebrides. Interestingly, media coverage of this controversy tended to use language similar to that of the pro-hedgehog groups. Our results show how content analysis allows differences in focus between stakeholder groups to be highlighted in a quantitatively rigorous way, and that this can encourage a dialogue to develop in which all stakeholders are at least addressing the same issues.”
…quantitatively rigorous? Yeah well, I don’t think you have to run statistical tests on word counts to know they’re approaching the situation differently and using their written skills to best frame their position. it does however make it easier to identify and address differences.
Miles Per Word
Changing how fuel efficiency is described can make a difference in what cars people buy. Rather than describing efficiency in miles traveled per gallon, if one were to describe it in gallons per 100 miles traveled, it would be easier to see how much of a difference it would make to take a very low efficiency car and improve it.
At 10 mpg, it takes 10 gallons to travel 100 miles. If that were doubled to 20 mpg, it would take 5 gallons. You save 5 gallons.
A car with 25 mpg takes 4 gallons to travel the same distance. Double that to 50 mpg would take 2. You save only 2 gallons.
We’re better off by having people ditch SUV’s for average cars than replacing average cars with better ones. This may seem pretty obvious for after all the SUV is the symbol of everything anti-environmental, but perhaps moreso when presented slightly differently.
This serotonin story has been in the news last week.
Serotonin functions as a neurotransmitter associated with anger, aggression, mood, and appetite. In this study, the appetites of half the participants were modified to have lower levels of serotonin. Then both groups were presented offers in an ultimatum game. One person suggests how to split a sum of money and the other can either accept their share and end up with something, but less than the other person. Or they can refuse, so that neither party receives anything.
In CrockettÃ¢â‚¬â„¢s study, detailed this week in Science, 20 participants were given a number of attempts at the game, with fair offers, defined as 45% of the stake, unfair offers, defined as 30% of the stake, and very unfair offers, defined as 20%. Participants were randomized to get the serotonin-lowering treatment or a placebo.
While placebo participants rejected about 65% of very unfair offers, those with low serotonin rejected more than 80%.
Researchers also measured the mood, fairness judgement and reward processing of participants. They found these to be unaffected by lower serotonin, clearly implicating the neurotransmitter in the more aggressive response to injustice.
Or in other words, from TierneyLab:
But in this experiment the players rejected that deal 80 percent of the time when their serotonin levels were low, and it wasnÃ¢â‚¬â„¢t because they were cranky or depressed, the researchers report. They conclude that lower levels of serotonin Ã¢â‚¬Å“can selectively alter reactions to unfairness,Ã¢â‚¬Â and note that in the experiment this condition Ã¢â‚¬Å“increased retaliation to perceived unfairness without affecting mood, fairness judgments, basic reward processing or response inhibition.Ã¢â‚¬Â
Now… I don’t have access to the article itself, and I know that they say that they controlled for all of these factors, but only using only 20 participants seems weak to me. 10 people got the placebo. 10 people got the serotonin-reducing drink. I’m sure the difference is significant but the sample size is so small, I’m skeptical.
The other thing that I’m leery of is the whole slew of conclusions across the swath of stories reporting these results. They would have you believe that this is proof that low serotonin causes aggression, impulsivity, poor social decision-making, irrational behavior. Are these really the reasons for intolerance of unfairness?
I don’t have much tolerance for it myself. My integrity and pride has a certain value, and I would rather maintain a reputation of fairness than accept some spare change. Yes, I can be induced to accept an unfair deal, but it’d either entail a significant sum of money, or a benefit down the line. Perhaps I am aggressive. Perhaps I am angry. But I’m not cheap.
I am a graduate student conducting a survey for a research project. The questions in this survey will be used to explore how people evaluate events happening now differently than events happening in the future. This research will help policy analysts make better choices about environmental policy options. If you are at least 18 years old and interested in participating, click on the link below. The survey should take about 10 minutes.
The survey is located here
I had a revelation today. Perhaps I am slow; behind the times…
As an environmental economist, I at least, believe that environmentalism is for everyone. If you were to truly account for all the externalities, it would be clear to everyone that we are not allocating our resources properly and the environment should be considered accordingly.
And yet, we are not particularly good at selling environmental considerations to individuals. If the truth is truly compelling, honestly logical, and the right thing to do, then anyone should be convinced. Each individual, no matter where they live, how they live, or what they believe in, should have the potential to see this reasoning. But when there is a focus on ethics, morals, and culture–things that are not universal–you miss out on what should be the compelling arguments. It is not the environmental culture that I buy into.
Now, I agree that there is due applause for the environmental movement embracing economic concepts. But these are merely tools used in the name of an older, unchanged philosophy, disjointed piece rather than insights to a larger whole. The market is far more complex than a credit trading house and a price signal. Markets and economics have so much more to offer. It is far more sensible to appeal to self-interest than to expect others’ utilities to bend to one’s will.
Environmentalists should know, more than anyone else, that one size does not fit all.
« Previous entries Next Page » Next Page »