Everyday Peeple

Forget Parcheesi. Bayesian games are proper fun for the whole family. In a Bayesian game, one (or both) players doesn't know what type of person the other is. This is important because play will vary depending on the nature of your opponent. If you face the decision about whether or not to be the tough guy in a barroom confrontation, it's in your best interest to know whether or not the other dude can mop the floor with you. By reverse induction, it's therefore wise in such situations to signal to others that you're tough, or crazy or dangerous. This is true whether or not you're actually a badass. Acting tough in a barroom brawl game is therefore a pooling equilibrium. Contrast this with, say, the automobile market. A '31 Duesenberg Phaeton gets a motorist from Point A to Point B roughly as effectively as an '86 Yugo (provided you can find one still in working condition), yet for the price of one Doozy ($1.4M at auction), you can buy close to 1500 Zastava Korals (again, provided that many exist in the wild. A Dusenberg isn't 1500 times as efficient at transporting humans, so the price reflects something else about the owner. This is a separating equilibrium.

For most existing Bayesian-type games, we have pretty well-established heuristics about what to expect and how to play. We know when to be sincere (the marriage game) and when to be strategically dishonest (the dating game). But that's for well-established, properly-understood situations.

Meet Peeple, aka Yelp, but for humans. Yes, yes: the idea was stolen from either Dinosaur Comics or SMBC, depending on whether you ask Ryan or Zach (I do so hope they duke it out in the comments [they won't]). So far, most of the press has been pretty unkind. It's easy enough to imagine anonymous vandals ruining moderate-to-high profile people's reputations with relative ease and impunity. If this happens, the sensible response from folks with chronically bad ratings is to poison the well, so to speak. That is, if a separating equilibrium arises, where actually awful people tend to accumulate negative reviews, then those awful people will have an incentive to sock-puppet up and leave piles of negative reviews on the profiles of their rivals, thereby creating a pooling equilibrium where everyone looks awful. Sort of like Encyclopedia Dramatica, but with less fun and imagination.

Still, I think it'd be a nice experiment to see what sort of Bayesian game arises. Recall that some Bayesian games have no pure dominant equilibrium strategy. If I were a betting man, I'd say that there would be some chaos (pooling eq) among second-tier culture warriors, but most other folks would enjoy more-or-less accurate ratings. If I were a betting man.

Edit: the above assumes that the proposed venture isn't merely a silly hoax (pr ~.6)

 

Happy Reciprocity Day!

Trust is but half an exchange. Reciprocity is its conjoined sister. On the 31st of October, children trust that strangers will give them candy, homeowners trust that kids won't pelt their houses with eggs and toilet paper.

And on the morning of November 1st, we discover if that trust was warranted.

The jerkfaces of America occasionally find a degree of comeuppance in the form of yolk and albumen. But by and large, trust is rewarded with the elements of a fulfilled contract. Halloween is an ex ante contract; the day after is the ex post aftermath. And to the extent that all's well, that's cause for a little quiet celebration deep in the cockles of your euvoluntary heart.

Barter?! But I Just Met Her!

Bartering is a high-trust activity. My in-laws hail from a small Lithuanian farm. To this day, they still plow the fields with those stout little Baltic horses that look like 3/4 versions of proper draft animals. Things being as they are, it's not at all uncommon for them to round up a few folks from the village and get them to help out at harvest time in return for a heaping helping of delicious Lithuanian vodka. For skilled help, neighboring farmers rely on an informal intertemporal labor pool. You help me yank potatoes out of the ground this fall, I help you fertilize the rye field next spring.

Both of these types of transactions rely on trust. The point transactions are of the caveat emptor type: I'm getting decent labor (while it's still sober) and my hands are getting quality ethyl spirits. The longer-horizon arrangements are part personal trust, part trust in the informal institutions (and maybe some trust in regime continuity, but for bucolic kaimietiai, the goings-on in Vilnius are mostly irrelevant political theatrics). Because trust suffuses these exchanges, it's probably reasonable to expect them to be mostly euvoluntary.

Bartering is likely to be something that happens when both parties are similarly desperate and not especially disparate. That is, barter is an institution poor people of mostly equal station resort to when times are tough. Moral intuitions towards barter transactions are probably predicated on this, so I have a hunch that comfortably wealthy, pampered Westerners might cluck their tongues at the plight of barterers, but they are unlikely to cry exploitation. I can also claim that should such wealthy, pampered Westerners find themselves in a bargaining situation with these poor, benighted souls abroad, they will find themselves utterly fleeced [I cite personal experience here].

I do wonder how portable the moral intuitions are behind barter. How would folks in the West react if they found out oil firms were paying local derrick workers in goats rather than cash? Even if the goats were more valuable than their cash equivalent to the workers, do you suppose network news viewers would be filled with grand indignation? I'd bet even odds they would be.

Barter is unsophisticated trade: it's used by children and underdeveloped societies. Reverting to barter in a cash economy carries with it social and emotional freight. It's fine for close equals to barter, but that's probably the extent of it. Anything else smacks of condescension, rightly or wrongly, irrespective of the opinions of the nominally disadvantaged trading party.

I usually like to close posts like this with a meaningful conclusion or some follow-up questions, but I don't have anything for you today. I suppose that if you're interested, you might ask some people you know about their feelings towards barter. I think you might find that people have interesting and perhaps ill-examined attitudes towards cash transactions. This is one of the reasons I don't much care for monetary economics: I see economics as a holistic discipline and plumbing the public's attitude to media of exchange is probably more challenging than many economists suspect.