The Uber Dilemma

["Dave Farber" <farber () gmail com>]

Begin forwarded message:

> From: Dewayne Hendricks <dewayne () warpspeed com>
> Date: August 16, 2017 at 11:15:54 PM EDT
> To: Multiple recipients of Dewayne-Net <dewayne-net () warpspeed com>
> Subject: [Dewayne-Net] The Uber Dilemma
> Reply-To: dewayne-net () warpspeed com
>
> [Note:  This item comes from friend David Rosenthal.  DLH]
>
> The Uber Dilemma
> By Ben Thompson
> Aug 14 2017
> <https://stratechery.com/2017/the-uber-dilemma/>
>
> By far the most well-known “game” in game theory is the Prisoners’ Dilemma. Albert Tucker, who formalized the game 
> and gave it its name in 1950, described it as such:
>
> Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of 
> communicating with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge. 
> They hope to get both sentenced to a year in prison on a lesser charge. Simultaneously, the prosecutors offer each 
> prisoner a bargain. Each prisoner is given the opportunity either to: betray the other by testifying that the other 
> committed the crime, or to cooperate with the other by remaining silent. The offer is:
>
>    • If A and B each betray the other, each of them serves 2 years in prison
>    • If A betrays B but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa)
>    • If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge)
>
> The dilemma is normally presented in a payoff matrix like the following:
>
> What makes the Prisoners’ Dilemma so fascinating is that the result of both prisoners behaving rationally — that is 
> betraying the other, which always leads to a better outcome for the individual — is a worse outcome overall: two 
> years in prison instead of only one (had both prisoners behaved irrationally and stayed silent). To put it in more 
> technical terms, mutual betrayal is the only Nash equilibrium: once both prisoners realize that betrayal is the 
> optimal individual strategy, there is no gain to unilaterally changing it.
>
> TIT FOR TAT
>
> What, though, if you played the game multiple times in a row, with full memory of what had occurred previously (this 
> is known as an iterated game)? To test what would happen, Robert Axelrod set up a tournament and invited fourteen 
> game theorists to submit computer programs with the algorithm of their choice; Axelrod described the winner in The 
> Evolution of Cooperation:
>
> TIT FOR TAT, submitted by Professor Anatol Rapoport of the University of Toronto, won the tournament. This was the 
> simplest of all submitted programs and it turned out to be the best! TIT FOR TAT, of course, starts with a 
> cooperative choice, and thereafter does what the other player did on the previous move…
>
> Analysis of the results showed that neither the discipline of the author, the brevity of the program—nor its 
> length—accounts for a rule’s relative success…Surprisingly, there is a single property which distinguishes the 
> relatively high-scoring entries from the relatively low-scoring entries. This is the property of being nice, which is 
> to say never being the first to defect.
>
> This is the exact opposite outcome of a single-shot Prisoners’ Dilemma, where the rational strategy is to be mean; 
> when you’re playing for the long run it is better to be nice — you’ll make up any short-term losses with long-term 
> gains.
>
> [snip]
>
> Dewayne-Net RSS Feed: http://dewaynenet.wordpress.com/feed/
> Twitter: https://twitter.com/wa8dzp



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