PHIL 270 Lecture Notes - Lecture 3: Public Goods Game, Free Rider Problem, Pareto Efficiency
4 May 2018
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PHIL 270: Business Ethics
1.20 Lecture Notes – Satz
What is a prisoner’s dilemma?
· Any situation where the outcome depends on the individual choices
· The individually rational strategies produce an undesirable outcome
· Mechanisms can be internal or external for getting from the Nash equilibrium to the Pareto optimum
· Not dependent on the objective features of the world; rather, we care about the individuals’
preferences over their objective features, which is why solving the PD or other collective action
problems is not solvable just with objective considerations (cannot just read the objective payoffs of
the world)
Frank and Gilovich
· Are people selfish wealth-maximizers?
· If ou teah people aout people’s ehaior, does it change their behavior?
· Start with a public goods game
o Public and private account
o Preditio fro traditioal, ratioal hoie perspetie eoois: people ould ot iest
any money, be a free-rider 100%
o Average in experiments = 50%, which is not consistent with the predictions of rational choice
theory
o A lot of consideration for fairness norms (some thought 50% was fair, and some thought that
the whole amount was fair)
· Possible framing effects
o Eperiet as desried as iestets i a iestet gae rather tha otriutios
in a fairness game
▪ Cotriutio iplies doatio
▪ Economists see investments are a way to maximize returns, so that frame may have
affected the individual choices
· Eooists he asked hat fairess is either refused to answer or gave very convoluted answers
o Economists are being taught to disparage the possibility/feasibility of a fair outcome
· “ide: “tudets i Dos’s lass ere uh less likel to ote after learig aout puli hoie theor
in his class
· Discussion of situation
o What if we played this public goods game REPEATEDLY?
o 1st game: 40% average contribution levels
o Next games: in the absence of communication, there will be declining contributions over time
(more defections over time)
o One interpretation: Victory for the self-interest game? Are people just learning how to play the
game?
o Another interpretation that’s proal true: the people are indignant towards those who
exploited them and they are protecting themselves against the free riders
o Rationality: acting in a way that maximizes your utility
o For a psychopath (who has no empathy), the rational move is investing $0
o For everyone else who cares about other people but also wants to guard against exploitation,
there is NO uniquely rational move
· Gintis and others
o Added a component to the game – prosocial punishment or altruistic punishment
o Same game, except with an amendment (an addition of the second-order public goods game)
o Oe people gie aoousl, e pulish the data of ho gae or ho did’t
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Any situation where the outcome depends on the individual choices. The individually rational strategies produce an undesirable outcome. Mechanisms can be internal or external for getting from the nash equilibrium to the pareto optimum. E(cid:272)o(cid:374)o(cid:373)ists (cid:449)he(cid:374) asked (cid:449)hat (cid:862)fair(cid:374)ess(cid:863) is either refused to answer or gave very convoluted answers: economists are being taught to disparage the possibility/feasibility of a fair outcome. Ide: tude(cid:374)ts i(cid:374) do(cid:449)(cid:374)s"s (cid:272)lass (cid:449)ere (cid:373)u(cid:272)h less likel(cid:455) to (cid:448)ote after lear(cid:374)i(cid:374)g a(cid:271)out pu(cid:271)li(cid:272) (cid:272)hoi(cid:272)e theor(cid:455) in his class. I(cid:373)agi(cid:374)e: i"(cid:373) an eccentric billionaire and i have a bizarre fetish. I want you to form the intention by midnight tonight to drink at noon tomorrow a toxin that will make you mildly ill. If you form this intention, at 6 am, i will put 10 million dollars in your bank account after detecting that intention. Intention involves a reason to believe that you should do this action in the future.
