[Turambar]

skip this dumb competition.  go buy a half gallon of cheap vodka.  more entertainment value for your money.

[TrashMan]

Seriously, lets just ignore him. The thread is far too interesting to be dragged into the usual spiral of Trashman's inability to grasp any complicated notion.

I have two words for you....

Well, you know what they are, don't you?

[Enigmatic Entity]

There's another excellent game that illustrates this point.

You are going to play a game for ten seconds. You will be partnered with someone else.

From this moment on, you cannot speak or communicate, and you must close your eyes and keep them shut. Please assume the arm wrestling position!

Now, you're going to arm wrestle, and every time your opponent's hand touches the desk, you will receive $1. You have 10 seconds. Go.

I imagine you can tell what the optimal strategy in this game is, and I also imagine you can guess what pretty much everybody actually does.

I bet they lock in the upright position, if one is much stronger and smart, they will try to jack-hammer their opponent's hand on the table, although the opponent will probably try to keep their hand on the table so the other person can't get any more profit...

[General Battuta]

There's another excellent game that illustrates this point.

You are going to play a game for ten seconds. You will be partnered with someone else.

From this moment on, you cannot speak or communicate, and you must close your eyes and keep them shut. Please assume the arm wrestling position!

Now, you're going to arm wrestle, and every time your opponent's hand touches the desk, you will receive $1. You have 10 seconds. Go.

I imagine you can tell what the optimal strategy in this game is, and I also imagine you can guess what pretty much everybody actually does.

I bet they lock in the upright position, if one is much stronger and smart, they will try to jack-hammer their opponent's hand on the table, although the opponent will probably try to keep their hand on the table so the other person can't get any more profit...

Why would you ever do that, though? What possible utility is there in trying to reduce your opponent's profit? It's not a zero-sum game. Both of you can win.

This test isn't displaying any form of group-think after it passes ~$20. Past $20, as I said, it's 2 participants making fools out of themselves.

This test has nothing to do with group think. It's a measure of individual human irrationality. And because any two members of the group are likely to fall into the trap, it holds across the board.

As I've told you twice now, the cognitive heuristics that trigger this behavior are present in everyone.

Oh for ****'s sake, it's a twenty dollar bill! I could get that out of some poor bugger's wallet in the city with less effort. And besides, I'd find it more amusing sitting back and watching the other guys and girls bet money and proceeding to laugh at the wanker who ended up paying in excess of $20 for a $20 bill.

Bunch of wankers.

You're missing the point (as are many others.) The $20 bill is an arbitrary target. It could be any item.

What this demonstrates is the presence of something called the sunk cost effect. People are extremely reluctant to abandon their investment in a goal and cut their losses, even when continued investment means greater losses.

I have no idea what you're alluding to here, but I don't like it.

I was referring to the test mentioned here - for the most part they operate under restrictions that would never happen in real life (like - no communication of any kind), and IMHO, that cheapens the tests themselves.

And I really don't see what kind of "insight" you think you've gained from this, but I do know it's nothing pertinent.

You're missing the point too. The test provides all the necessary information to avoid the death spiral that always occurs towards the end. Yet people consistently do not avoid it. This demonstrates that people are just not always very good at rational outcomes.

If you think this is irrational and contrived, then why does the exact same phenomenon occur in real life, in non-restricted situations?

Examples.

Two major pharmaceutical corporations were both selling a pill that cost $1 to manufacture. Corporation A entered the market selling at $1.60. Corporation B enter at $1.40.

The two corporations both cut prices until they were selling the pill at sixty cents.

These are real corporations!

Another example is the recent Viacom vs. somebody bidding war on Paramount. The bidding war got out of control, and Viacom ended up overpaying by two billion dollars.

It's the exact same situation.

So yes, this does work in real life.

[Timerlane]

I bet they lock in the upright position, if one is much stronger and smart, they will try to jack-hammer their opponent's hand on the table, although the opponent will probably try to keep their hand on the table so the other person can't get any more profit...

Why would you ever do that, though? What possible utility is there in trying to reduce your opponent's profit? It's not a zero-sum game. Both of you can win.

The problem, I think, is that when people are forced(or encouraged) to react, instead of thinking things through, will think only of the very-immediate here and now. In the scale of the game itself, with no preparation(no time to think of the metagaming), and the "carrot" of money as fuel to the fire, the only choices that really present themselves are: overpower your opponent and 'win', or be overpowered and 'lose'. 'Not losing'(or at least 'losing less'), is preferable in the mind to outright 'losing', so when reacting, people would rather deny any ground to their opponent.

There is also the problem that arm wrestling itself arguably comes with the baggage of "schoolyard/barroom demonstration of physical superiority", so I'd imagine male participants, even moreso, when 'reacting', will tend to turn the whole thing into a full-on tug of war rather than look "weak" in front of the group/opponent, regardless of the consequences at the end.

The 'fix', I guess, is to become detached, stoic "Vulcans"(well, what the canonical Vulcans wanted everyone else to think they were) who never allow themselves to 'react' to situations in the heat of the moment, don't really care what others think of them(as far as 'status' is concerned), and choose not to make shameless, self-centric personal gain as the driving force in their lives. But that's probably a little too much to ask from humanity.

[Qent]

Another thing about the $20 game is that it really makes a difference whether or not the players think they have to pay. Did the executives actually pay $2000 and $1999? Did they think they were going to?

They do, in fact, have to pay, even in the student version.

I would so love to be the guy who shows people that game.

[Aardwolf]

Another thing about the $20 game is that it really makes a difference whether or not the players think they have to pay. Did the executives actually pay $2000 and $1999? Did they think they were going to?

They do, in fact, have to pay, even in the student version.

I would so love to be the guy who shows people that game.

Sounds like easy money to me.

[redsniper]

I think most of you are forgetting that it's easy to say what you would do when you can sit back and think about this in advance. It's harder on the spur of the moment when you don't have time to prepare.

In b4 indignant forumites saying "Oh no, I would never..."

[Qent]

I would never stop bidding.

At first I thought this was supposed to demonstrate how many individuals making perfectly rational decisions are irrational when taken as a group. Now I understand it was a demonstration of the common fallacy that spending something to get something else somehow makes something else cheaper when you have to spend more.

[iamzack]

I would never start bidding because I would think "oh, it's only $20 and someone else will outbid me anyway, what's the point."

The arm wrestling thing I would totally fail at though.

[Lukeskywalkie]

I know this game - it's Martin Shubik's 'Dollar Auction', adjusted for inflation since the 50's.  A group of mathematicians, including John Nash and Von Neumann, came up with the game as a way to demonstrate irrational behavior within the bounds of a simple game (for the purposes of 'game theory', natch).  the strangely unprofitable behavior  usually results from competitive addiction, and the urge to 'throw good money after bad' in an attempt to save face.  Aparently it was a riot at dinner parties.  according to Shubik, 'a payment of between 3 and 5 dollars was not uncommon'.

Courtesy of a biography on Von Neumann, that I read a few months ago.  If discussion of this game amuses you, I highly recommend it: Prisoner's Dilemma, by William Poundstone.  It covers some of the strange behavior that this bizarre group of mathematicians engaged in while exploring game theory.  Reading it = logic +1

[Mongoose]

I would never start bidding because I would think "oh, it's only $20 and someone else will outbid me anyway, what's the point."

Seriously.  I've never won any significant games or contests involving luck, even board games, so I tend to avoid them...especially if they involve money.

[BloodEagle]

I would never start bidding because I would think "oh, it's only $20 and someone else will outbid me anyway, what's the point."

Seriously.  I've never won any significant games or contests involving luck, even board games, so I tend to avoid them...especially if they involve money.

That's why you roll the ones out of your dice. Sheesh! 

[TrashMan]

You're missing the point too. The test provides all the necessary information to avoid the death spiral that always occurs towards the end. Yet people consistently do not avoid it. This demonstrates that people are just not always very good at rational outcomes.

Well duh.
I could have told you that without any test.

After all, people are morons most of the time...

If you think this is irrational and contrived, then why does the exact same phenomenon occur in real life, in non-restricted situations?

I just do not like restrictions. Weather hypothetical scenarios or what not. That is all I was saying. Nothing more.

[Dilmah G]

Dude, how are you supposed to effectively 'test' something without any restrictions?

[watsisname]

Well duh.
I could have told you that without any test.

But you didn't, and your prior posts strongly suggested that you didn't grasp the underlying concept.

[Sushi]

Courtesy of a biography on Von Neumann, that I read a few months ago.  If discussion of this game amuses you, I highly recommend it: Prisoner's Dilemma, by William Poundstone.  It covers some of the strange behavior that this bizarre group of mathematicians engaged in while exploring game theory.  Reading it = logic +1

While we're recommending game theory books, gotta mention Axelrod's "The evolution of cooperation". Of all of the classes I took during my academic career, the game theory class was one of my favorites. Absolutely fascinating stuff.

[Lukeskywalkie]

Nice redirect, that's definitely up my alley.  sounds like an interesting counterpoint to Rand's objectivism, in addition to exploring a few ideas that game theory points out, but doesn't explain. Thanks!

[CP5670]

Courtesy of a biography on Von Neumann, that I read a few months ago.  If discussion of this game amuses you, I highly recommend it: Prisoner's Dilemma, by William Poundstone.  It covers some of the strange behavior that this bizarre group of mathematicians engaged in while exploring game theory.  Reading it = logic +1

While we're recommending game theory books, gotta mention Axelrod's "The evolution of cooperation". Of all of the classes I took during my academic career, the game theory class was one of my favorites. Absolutely fascinating stuff.

We used this book in the game theory classes I've been a TA for. It's easy to read and contains numerous real world case studies.