Game Theory TV

William Spaniel, an enterprising graduate student at the University of Rochester, has created a useful set of?twenty-six short YouTube clips on game theory.? I particularly like this explanation of forward induction and burning money:

William also uses game-theoretic thinking to solve practical problems like?how to catch a baseball during MLB batting practice.? Or listen in on his analysis of?how to find cheap gas using game theory:

My friends and I were driving back from Las Vegas to San Diego. About half way through the trip, we needed gas. We weren’t worried about suddenly running out, but we definitely couldn’t make it to two towns ahead of us-we absolutely had to get gas in the town we were about to pass through. There were five exits to the freeway in this city. The goal was to get gas for as cheap as possible.? The problem was that we knew virtually nothing about what the price of gas should be in this town, and we weren’t keen on going around in circles until we found the best one around.

Then, I realized that you had covered a similar problem about a year ago. Instead of cheap gas, the problem was?to find true love.

The solution to maximize your probability of success was to reject the first few suitors and pick the first of the remainder who is better than those you had gone out with previously. I suggested we try a similar strategy with the gas stations, as it has the same property. We breezed by the first two (which were selling for almost $3.50 each) before stopping at one with a much more reasonable price of $2.95. As it turned out, $2.95 was the best station available.

The game-theorist in me wants to ask under what conditions is this an equilibrium strategy?? But I love that William sees a connection between two widely divergent contexts.? To a game-theorist, both are questions of optimal search.? If game theory can help you?pick the right SAT answer without knowing the question, it’s not surprising that it might help you find cheap gas.

(Hat tip:?Authentic Organizations)


Norm

Princeton has their whole Game Theory class online

http://www.youtube.com/view_play_list?p=6EF60E1027E1A10B&sort_field=original&page=1

Derek

It's been a while since I took game theory, but isn't the burned money simply a sunk cost that will not influence either player's choice? Whether he burns money or skips breakfast, why should that be a factor? What's done is done.

What he should burn is the outfit his wife wants him to wear to the ballet.

With respect to finding the cheapest gas in an unfamiliar town, I think the best strategy in your scenario is to take one of the exits that will lead to the part of town with the most gas stations in close proximity to each other (probably the middle three exits). The added competition should keep prices down, unlike at the outlier stations. With your solution, you may take the first exit, see a high-priced outlier station, and then find your next two stations have better prices, but not as good as those near the middle of town.

Dana Chandler

Here's a grad student from UChicago teaching pricetheory and Econ 101 through what he calls "Intromediate" economics.

One of his most watched videos (of 45) is on the sexy concept of the marginal rate of substitution.
http://www.youtube.com/watch?v=0omoFlviuzo

Here's also a description of his channel and his own motivation for teaching intro econ through youtube:
http://www.youtube.com/user/intromediateecon

Kudos to Tony Cookson of UChicago for teaching intro econ students everywhere!

David

The gas station problem goes by many different names: the Secretary Problem, the Sultan's Dowry Problem, the Bachelor's Problem, and so on. The best strategy is to let about 3/8 of the gas stations/exits go by, then pick the next one that is better than all the ones you passed by. More information: http://en.wikipedia.org/wiki/Secretary_problem

Mauricio Noda

"...isn't the burned money simply a sunk cost that will not influence either player's choice?"

No, and this is due to the presence of imperfect information.

Past actions can be used to make a profile from the other players and predict what they will choose in the future. If you factor in that prediction in your own choices, sunk cost can influence them.