Make Haste while the Sun Shines

Another aspect on airlines and game theory....last year, my family and I were to go to the UK for my cousin's wedding. We had decided earlier in the year to go on the trip, and having the typical planner family that I have, everyone decided to purchase their tickets 6 months before the holidays (they felt the earlier they bought their tickets, the cheaper they'd be...not quite sure where that reasoning came from). Being the bargain hunter that I am, I chose to wait for a couple of months before the actual departure date. My family kept asking when I would purchase my ticket, but I kept putting it off. I now know that I was playing a game. See, I love to shop and have an innate ability to tell when a good sale is coming my way...okay, maybe not an innate ability, but experience. I knew that the airlines would most likely have some deals pop up as the holiday season came around. It was in the fall, but it was not a high travel period, so I took my chances and waited. If I purchased my ticket with my family members, I'd have ended up paying $700, if I purchased at the current period, I'd pay $625 (already less than what my fam had paid), and if I waited a bit longer, I could get the ticket for way less....I knew that cos of my experience...and so I waited. One day, the ticket price went all the way down to $550, but I waited....I waited and waited until the ticket prices became $900. See, I had played the game, but I had not made the move when I was supposed to. The $550 was the best price those tickets ever were, but I assumed that the airline industry were functioning based on my perception of rationality. In my mind, it was rational to have a dirt cheap ticket in a non-peak travel period, but in their mind, they were in it to make money. They gave me a grace period, but as the saying goes, "you snooze, you lose".

Business School Deferrals: Is there a game?

The link below takes you to a page that analyzes the situation with the decline in business schools granting admission deferrals. Is the game as simple as the schools not granting these deferrals because of the pool of students that will be accepted into the program in the following year? I think there is more to the game than just that. According to the article, the request for deferal can be blamed on the current economy and the cost of an MBA degree.

In the IT/OPs class that we are concurrently taking with SDA, we learnt that the goal of every business is to make money through the sale of the products an organization sells. In this case, the product that the organization is selling is an MBA degree from highly recognized business schools. If students keep requesting deferrals and keep getting them, they are depriving the school from funds that other students who were either on the wait list or were denied admission (because the spot was given to this student requesting a deferral) would have provided. The article also refers to students who are required to provide deferral deposits and to sign forms stating that they will not re-apply to any other programs. Those are strategic moves that these schools are making to secure the funding supply that business school admissions present.

Bottom line is that businesses will do what needs to get done to secure their financial standing amongst competitors. Now, maybe finding ways to increase the overall pie of the game could result in a parento efficient game whereby both the business schools and the students requesting admission deferrals will somehow, both earn the highest payoffs possible. How that level of cooperation will be attained is another topic entirely.

http://www.businessweek.com/bschools/content/dec2009/bs2009127_581931.htm

The Never Ending Battle Between Man and Nature: The Mount Everest Disaster of 1996

So, what really happened during the deadliest year of the mount everst climb? There were quite a number of games taking place on that day. For one, the climbing party knew that regardless of what point they were at on the climb, they had to turn course by 2:00 p.m. Experience had shown that not returning at that point could result in disaster, but the expedition party chose to go on. That was a game. If they stayed on course (as they were still not at the summit), they could push for, and still try to make their goal of reaching the summit. They knew that a game with nature would most probably result in a win for nature and a loss for them, but the payoff of the win was more important than not attempting the climb.

The payouts are as follows:
Man continues and storm occurs: 2 (the second least appealing option for the expeditiors)
Man continues and no storm occurs: 4 (the most appealing option for them)
Man turns back and storm occurs: 3 (the next best option for the adventurers)
Man turns back and storm doesnot occur: 1 (the least appealing option for these adventrous spirits)

These payouts explain it all. Because of the nature of adventurers, their highest payout is in the accomplishment of their goal. The goal of the expeditors was to reach the summit of Mount Everst that day, and so in analysing the situation and the payouts of each decision that was to be made on that day (both outlooks influenced by the experiences of the expedition leads which played a huge role in the judgement of these decision makers on that fateful day), the leads of the expedition chose to go with the highest payoffs for them.....continue on the path with the hope that the oxygen will suffice and that there would be no snow storm that would catch them off guard. Unbeknownst to them, nature's often unpredictable "nature" reigned supreme that day and claimed the lives of several of the expedition party. Several others survived but this was due to their perceived payoffs of the climb. For them, the highest payoff was to survive so turning back (regardless of whether the snow storm occurred or not) at the appropriate time had the highest payoff for them.

To Stay or not to Stay.......that is the question

As I look back at certain events of my life, I see how strategy has played a huge role in my decisions. I look specifically at one particular event in my life that occured several months ago and while I knew that I was making a decision, it wasn't until I looked through the eyes of a strategist (thanks to this SDA class) that I finally understood why I made the decision that I did.

I had gotten into the CDC through a Department of Health and Human Services (DHHS) program in 2006 and I just knew that it was going to be a fantastic experience. It was a 2 year program that encouraged rotating through various programs within not only the agency, but it's sister agencies (NIH, CMS, AOA) and it's parent (DHHS) as well. Our home office (the office that hired us) was to pay for our salary through the 2 year period even though they would technically only have us working for them for a 1 year period (because for 1 year of the 2 years, we were going through four 3 month rotations). At the end of the 2 year period, we were to return to our "home office". My supervisor had been very supportive throughout my rotations and even went as far as to suggest offices and programs that I should rotate in. I felt like I owed her my loyalty for her strong support throughout the year and so, when several opportunities came my way at the end of my 2 year period, I turned them down and stayed. I stayed even though I felt like I was not given the same support that some of my colleagues were receiving. I was starting to dislike my supervisor and the job.

Why did I stay? For the longest time, I could not fathom it. I attributed it to my loyalty to her, but could that really be what I had done? Maybe! Maybe not! I found out that what I had actually done was to somehow unconsciously run a decision tree assessing the payouts of both staying and leaving. They were as follows:

If I stayed, I could:
be miserable (+100)
learn to love job & excel (+1000)
be viewed as loyal by my boss and please the boss. The boss could then either choose to promote me (+500) or keep me static (+10)

If I left, I could:
get a worseoff job and be miserable (-100)
get a better job and be happy (+400)
be viewed as disloyal and displease boss. The boss could then either spread "bad" rumors about me (-10) or do nothing (+200).

So, in the long run (through rollback analysis), it was not my loyalty that made me decide to stay, but the fact that I feared the unknown and I gave more value to staying on and flourishing at my current place of work . I felt more comfortable believing that I would learn to love the job and excel at it. In my mind, I assumed my boss was rational and that she would have the same payoffs that I had. Maybe she would have encouraged me to apply and test unchartered waters, maybe she would have flipped out, or maybe I over analyzed the whole situation. Did I make the right decision? I'm not sure. I guess only time will tell.

The Twins Part 2

So as she drove them home that Tuesday afternoon, my neighbor began interrogating the boys and demanding an explanation from them. They stuck to their story and seemed like they were not going to budge and then my neighbour used a tactic better known as strategic moves in SDA.
In analyzing the moves she made (she wasn't even aware she was playing a game...all she wanted was to get to the bottom of the story), I realized that some calculation of the payoffs was made. The payoffs of the players is below with 4 being the highest payoff and 1 being the lowest payoff:

The mother
Punish the kids if they confess = 1
Don't punish the kids if they don't confess = 2
Punish the kids if they confess = 3
Don't punish the kids if they confess = 4

The twins
Punish the kids if theyconfess = 1
Punish the kids if they don't confess = 2
Don't punish the kids they confess = 3
Don't punish the kids if they don't confess = 4

The strategies and their payoffs:

Upper Row
Mom won't punish if kids confess: 4(mom), 3 (kids)
Mom won't punish if kids don't confess: 2(mom), 4 (kids)

Lower Row
Mom will punish if kids confess: 3 (mom), 1 (kids)
Mom will punish if kids don't confess: 1 (mom), 2 (kids)

The Nash Equilibrium in this case is 2,4 where the kids don't confess and the mother doesn't punish them. This is the best payout for all players of the game. Though it is the highest payoff for the kids, the mother can then threaten to play down unless the kids played left i.e the mother could threaten to punish them unless they confessed or punished them if they refused to confess. In evaluating the payoffs, the first strategic move their mother makes is already credible because it is her highest payoff, but the other strategic move (to punish the kids if they refused to confess) needed more credibility. If their mother had already made up in her mind that she was going to punish them reagardless of their decision to confess or not, she would have to show her moves as credible. Her payoffs would be way less than punishing them if they confessed than punishing them if they refused to confess.

I guess she had no problem giving them the credibility of her actions because before they pulled through the driveway, they had recanted the whole episode as it actually occurred. I guess mothers have that innate ability to get the most difficult confessions out of their beloved kids....

The Twins

Last Christmas, my neighbour came around to my place to our yearly Christmas dinner without her ten year old twin boys, so I had to ask where they were. "They are grounded for 3 months", she replied. "3 months"?, I asked out of exaggerated shock. "3 months", she replied matter of factly. On inquiring more about what "grave actions" her boys had taken that had landed them in 3 months worth of lost priviledges, she relayed the following story.

The previous Tuesday, the principal of her sons' school had called her requesting to see her immediately. She had never been requested to be seen by the principal of the school, so she hurriedly left her office and made the 30 minute commute to their school. On entering the principal's office, she found out that her boys had been in a fight with group of boys on the school bus and that they had been given letters to give to her. My neighbor was shocked...she knew that her kids were mischevious, but she had never known them to fight outside of the occassional brotherly spurts. What bothered her even more was the fact that they had both been given letters to give to her and she had never seen those letters. What had become of her boys?

As they drove home that afternoon, my neighbour was besides herself. She had raised her children properly and the fact that they had not only fought on the bus but also not given her the letter was of a huge disappointment to her. She finally got the reasoning from the both of them (one of them was being picked on and the other came to his rescue...a fight ensued and they were reported to their teachers. The teachers reported the incident to the principal who sent a letter informing her of the fight and requesting her presence in the school, but because she had been a "no show", the school had to call her). They were grounded for 3 months with no tv, movie, "hanging out with the boys" priviledges. Using the concepts of SDA, I now understand why the boys acted the way they did.

After realizing that their actions was going to land them in trouble, the boys had evaluated their payouts based on the actions they decided to take. The below are the payouts:

If they both told their mother what happened, they might as well kiss their Nintendo DS goodbye and face a disappointed mother (this was their biggest loss). This payoff was valued at -10 for the both of them

If neither one of them spoke up, they'd get their highly sought after game and the dotting love of their mother. This payoff was valued at 50 for the both of them.

If one spoke up and the other didn't, the one who spoke up would secure his mother's trust and respect forever.......while the one who chose to remain silent would be identified as the black sheep forever....This payoff was valued at 100 for the one that spoke up, and 25 for the one that remained silent.

Considering that their mother was called to the principal's office, one can only conclude that the boys selected the payoff that was best for them. Though this was a prisoner's dilema (because both boys had incentive to cheat as there was a better pay off for each of them if they opted to veer from the agreement to stay silent), the boys chose to remain loyal to themselves. How did their mother get the confession out of them? That was another game that was played...check out The Twins part 2.

Wal-Mart and Amazon: What's the deal?

Hmmm...looks like Wal-Mart is at it again. The below article assesses the strategy behind the recent price war between Amazon and Wal-Mart. Clearly, as two major giants in their respective industries, the payoffs of the price war way outweigh the costs of "sparring". The strategy, as is common in most businesses isn't necessarily to gain customers by reducing the prices of a couple of books, but to lure the consumer and cause them to unconsciously purchase those items that they really don't need. This strategy reminds me of the departmental store Macy's and the ploy they use in getting customers into their stores. The coupons they send in the mail isn't necessarily for me to get $10 off a $30 item, but to get me into the store, entice me with the elaborate display of items that if left in their standard form would not necessarily appeal to me, and create an illusion for me that getting these items is mandatory for my survival. So, where is the game theory? In Macy's, it is in their use of the cognitive and behavioral phenomenon of us humans. We all have an innate desire to acquire material goods and these stores know it, so they capitalize on this knowledge.

In the article below, the strategy is in the price competition. Of course, Wal-Mart and Amazon’s ploy may not necessarily be to engage in a price war….there are only 10 books that are in question here, but this move will hurt not only the publishers, the authors, and if care is not taken, the book retail industry. Is there a way that these industry giants can figure out a way to be Pareto efficient between themselves and between the authors? For the new kids on the block, that would be virtually impossible, but for veterans like Daniel Steels, maybe there could be a sliver of hope. Whatever the decision would be though, the first thing that would need to occur would be a discussion. The issue of trust and value of fairness will have to be addressed earlier in the discussions and some level of compromise will have to be met. There is a point where both parties can maximize their profits, whether by exploring mixed strategies or through some other means, but one thing is for sure, cooperation and collaboration is key for the good of all involved. http://www.newyorker.com/talk/financial/2009/11/09/091109ta_talk_surowiecki