The Travelerstrongsstrong Dilemma - University of Virginia.pdfVIP

By Kaushik Basu THE TRAVELER’S Lucy and Pete, returning from a remote Pacific island, find that the airline has damaged the identical antiques that What numbers will Lucy and Pete write? What number each had purchased. An airline manager says that he is happy would you write? to compensate them but is handicapped by being clueless about Scenarios of this kind, in which one or more individuals the value of these strange objects. Simply asking the travelers have choices to make and will be rewarded according to those for the price is hopeless, he figures, for they will inflate it. choices, are known as games by the people who study them Instead he devises a more complicated scheme. He asks (game theorists). I crafted this game, “Traveler’s Dilemma,” each of them to write down the price of the antique as any in 1994 with several objectives in mind: to contest the narrow dollar integer between 2 and 100 without conferring togeth- view of rational behavior and cognitive processes taken by er. If both write the same number, he will take that to be the economists and many political scientists, to challenge the lib- true price, and he will pay each of them that amount. But if ertarian presumptions of traditional economics and to high- they write different numbers, he will assume that the lower light a logical paradox of rationality. one is the actual price and that the person writing the higher Traveler’s Dilemma (TD) achieves those goals because the number is cheating. In that case, he will pay both of them the game’s logic dictates that 2 is the best option, yet most people lower number along with a bonus and a penalty— the person pick 100 or a number close to 100— both those who have not who wrote the lower number will get $2 more as a reward for thought thro