TRAVELER’S DILEMMA.


MICHAEL AND NONIE, RETURNING FROM A EMOTE PACIFIC ISLAND, find that the airline has damaged the identical, rare antiques that each had purchased. An airline manager says that he is happy to compensate them, and surely will, but is handicapped by being clueless about the true value of these very strange objects. Simply asking the travelers for the price is hopeless, he just figures, for they will naturally inflate it.


Instead he devises a more complicated scheme. He asks each of them to write down the price of the antique as any dollar integer between 2 and 100 without conferring together.


If both write the same number, he will take that to be the true price, and he will pay each of them that amount. But if they write different numbers, he will assume that the lower one is the actual price and that the person writing the higher number is cheating.


In that case, he will pay both of them the lower number along with a bonus and a penalty---—the person who wrote the lower number will get $2 more as a reward for honesty and the one who wrote the higher number will get $2 less as a just punishment. For instance, if Nonie writes 46 and Michael writes 100, Nonie will get $48 and Michael will get $44.


What numbers will Nonie and Michael write?


What number would you write?


SCENARIOS OF THIS KIND, in which one or more individuals have choices to make and will be rewarded according to those choices, are known as games by the people who study them (game theorists).


I crafted this game, “Traveler’s Dilemma,” in 1994 with several objectives in mind: to contest the narrow view of rational behavior and cognitive processes taken by economists and many political scientists, to challenge the libertarian presumptions of traditional economics and to high-light a logical paradox of rationality.


Traveler’s Dilemma (TD) achieves those goals because the game’s logic dictates that 2 is the best option, yet most people pick 100 or a number close to 100--—both those who have not thought through the logic and those who fully under-stand that they are deviating markedly from the “rational” choice.


Furthermore, players reap a greater reward by not adhering to reason in this way. Thus, there is something rational about their choices. Remember, the winner is the one receiving the most money!


SOURCE:

SCIENTIFIC AMERICAN Magazine

June 2007. (Pg. 90)



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