Hoteling and locational choice

https://www.youtube.com/watch?v=jILgxeNBK_8

How to bargain in politics?

http://qz.com/838321/nonviolent-communication-the-scientifically-proven-step-by-step-guide-to-having-a-breakthrough-conversation-across-party-lines/?utm_source=Quartz+Morning+Brief&utm_campaign=79ea024f53-EMAIL_CAMPAIGN_2016_11_17&utm_medium=email&utm_term=0_1ff2527dbb-79ea024f53-55459981

How to bargain in politics?

http://qz.com/838321/nonviolent-communication-the-scientifically-proven-step-by-step-guide-to-having-a-breakthrough-conversation-across-party-lines/?utm_source=Quartz+Morning+Brief&utm_campaign=79ea024f53-EMAIL_CAMPAIGN_2016_11_17&utm_medium=email&utm_term=0_1ff2527dbb-79ea024f53-55459981

Disparate examples of game theory and the rational actor paradigm in action

Business World. Donald Trump and Vladimir Putin's Troublemakers
by: Holman W. Jenkins, Jr.
Nov 05, 2016
Click here to view the full article on WSJ.com

TOPICS: Economic Incentives

SUMMARY: The Kremlin has a stake in promoting email leaks that suggest America is as kleptocratic as Russia. This week's Business World column is about two incentive problems. First, "Dictators can be-but aren't necessarily-trapped into ever-increasing repression by fear of retribution over the means they used to gain power." Second, "The U.S. Army loads more checklist requirements on junior officers and their units than they can possibly comply with, leaving junior officers little choice but to become practiced at deciding which requirements to meet and which to lie about."

CLASSROOM APPLICATION: Students can evaluate the effect of pressures (i.e., incentives) that lead to unethical behavior, such as ever-increasing repression by dictators and lying and cheating by employees.

QUESTIONS: 
1. (Advanced) The column notes "tit-for-tat strategies." Describe these strategies. In games such as the prisoner's dilemma, how can the use of tit-for-tat strategies promote behavior that increases the payoffs of the players involved in the game?

2. (Introductory) What causes dictators to ever-increasingly repress their citizens?

3. (Advanced) Why does setting impossible standards for employees to meet result in unethical actions like lying and cheating by employees?

Reviewed By: James Dearden, Lehigh University

Is traffic congestion a prisoner's dilemma?

One Driver Can Prevent a Traffic Jam
by: Sue Shallenbarger
Oct 12, 2016
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: Game Theory

SUMMARY: Proponents advise jam-busting techniques, such as preventing bottlenecks, letting others cut in.

CLASSROOM APPLICATION: Students can evaluate whether drivers in heavy traffic are playing a prisoner's dilemma. If so, they can explain driving behavior that makes everyone driving in heavy traffic worse off.

QUESTIONS: 
1. (Advanced) Evaluate the following statement as a cause of traffic congestion: "Selfishness takes hold, and people don't necessarily think much about the common good."

2. (Advanced) What is the prisoner's dilemma? Are drivers in heavy traffic playing a prisoner's dilemma? Each driver does strictly better leaving no gap in front of him or her. However, collectively drivers do better if everyone leaves a gap.

3. (Introductory) Why is a driver leaving a gap in front of his or her car analogous to a person holding a door for others?

Reviewed By: James Dearden, Lehigh University

Game Theory and the Race to Be the Republican Nominee for President

http://www.investors.com/politics/perspective/bush-cruz-and-rubio-hooked-on-horns-of-the-prisoners-dilemma/

Game Theory in Batman

Batman, Joker robs bank. Is agreeing to kill the “alarm guy” consistent with Nash equilibrium? Saying that the gun was empty when the robber knew it was not? Believing the robber when he said the gun was empty?

Old posts on Game Theory

http://edlikeseconomics.blogspot.com/search/label/Game%20Theory

"Free" shipping

More Retailers Offering Free Shipping on Returns
by: Loretta Chao
Oct 12, 2015
Click here to view the full article on WSJ.com

TOPICS: Marketing

SUMMARY: Retailers are making free returns available to more online customers, delighting consumers but raising costs for the companies.

CLASSROOM APPLICATION: Instructors can present three points about the article. First, the choice whether to offer free shipping on online returns may be a prisoner's dilemma. Second, they can also highlight the point that a current costly decision (to offer free shipping on online returns) may have future benefits (retaining customers). Third, because "free shipping" is not free, consumers may be higher prices when the policy is implemented, which means that consumers who tend not to return products may be made worse off by the policy.

QUESTIONS: 
1. (Advanced) Consider a game in which each of two online retailers decides whether to offer free shipping on returns. Suppose each retailer's payoffs are the following: 10 if both retailers offer free shipping; 15 if the retailer offers free shipping, but the competitor does not; 5 if the competitor offers free shipping, but the retailer does not; and 12 if neither retailer offers free shipping. What type of game are the retailers playing? What is the Nash equilibrium of the game? What is the dilemma in the game?

2. (Introductory) What is the long-term effect to a retailer of a customer having to pay to return a product to the retailer?

3. (Advanced) No shipping is "free." Classify the type of consumer who is made better off by the offer of free shipping for online returns and the type of consumer who might be made worse off.

Reviewed By: James Dearden, Lehigh University

Manipulating Markets

The Guardian has published a pair of articles (first and second) about charges that large energy companies manipulated energy prices. The charges appear to center on "attempts to distort the prices reported by the company" which "are critically important because many wholesale gas contracts are based on them and small changes in the price can cost or save companies millions" (first). I left with several thoughts.

The second article quotes a third article to point out the importance of incentives. "[T]he entire system is'dependent on consenting adults and traders not talking up their book but that is inevitably what happens.'"

Second, having prices tied automatically to a "reported" average creates opportunity for mischief, especially if the average includes only a subset of all trades. 

Third, the initial charge was that traders had artificially depressed prices. Whether you gain from a price increase or a price decrease depends on which side to the market you stand. 

Forth, the divergence of interests is why buyers rarely collude with sellers. The first article seems to miss this point when it states, "the vast majority of the stuff we use to heat our homes and run our businesses is sold "over the counter" between two parties, who can, if they wish, conspire to make mischief." I can see how someone holding a book to buy oil at reported average can benefit by agreeing to sell some oil at sub-competitive prices if the contract reduces the reported average; but, this is hardly a conspiracy between the buyer and the seller.