“…To be eligible for DACA, applicants must meet several eligibility requirements such as: have entered the United States before their 16th birthday, be currently in school, a high school graduate or be honorably discharged from the military, be under 31 years of age, and not have been convicted of a felony, significant misdemeanor, or otherwise pose a threat to national security….”
However, this Obama-era policy has proven to be quite contentious, especially considering the nativist proclivities of the Trump administration. This sentiment is reflected in the Southern District of Texas ruling in State of Texas et al v. United States of America et al ruling DACA to be illegal. There are many arguments for restricting immigration, but it is possible that limiting immigration could produce problematic consequences? Adverse outcomes beyond the lofty ideals of multiculturalism? Currently, in the United States, there is a labor shortage, being dubbed the Great Resignation. More people are declining to participate or return to back to the workforce. Labor force participation was reflected as 61.9 percent as of December 2021.; when compared to December 2019, 63.3 percent.
The discrepancy in workforce participation between 2019 and 2021 may seem minor, but to see the severity of the effect, one only needs to view the lack of staffing at the local grocery store. Combined with global supply chain shortages it becomes apparent that commodities and entry-level labor are in short supply. Does the question become why further decrease the pool of potential workers through cracking down on immigration? Then arises the erroneous myth that immigration, specifically illegal immigration harms American workers. Most Americans polled even admit that immigrants assume job roles that most native-born citizens are unwilling to perform. It should note that deporting DACA-eligible workers would also exacerbate current worker shortages in higher-paid jobs considering nearly a quarter of DACA have attained a college degree (p.2).
If anything, considering the current economic conditions, restricting immigration/ deporting undocumented workers could result in a Prisoner’s Dilemma. A mutual defection between undocumented immigrants that entered the United States as children (DACA Dreamers) and the vigilant “immigration hawks”. By the very fact, the dreams refuse to go back to their country of “origin” this could be seen as an implicit defection against the immigration hawks who seek to deport all illegal immigrations and be strict about who is permitted to assume residency in the United States. Naturally, the incentives structures between the two groups are irreconcilable, the odds of a mutually acceptable compromise are slim-to-none; the immigration debate is a winner-take-all game. Compromise can be achieved in politics but is rendered untenable because of political polarization. Immigration has become a hotly contested wedge issue where making concessions are no longer fashionable. The immigration hawks do not realize that they are shooting themselves in the foot. When labor shortages impact establishments ranging from the drive-thru to the emergency room, it affects everyone. Regardless of their position on immigration, making it asinine to refuse willing labor participation the right to work.
A few years about Tilea West contributed an excellent article to the Foundation for Education website, entitled Coase Theorem, The Prisoner’s Dilemma, and Zero-Sum Games in Modern Dating, an article applying Coase’s Theorem and Game Theory to the modern dating scene. For me, the most engaging section of her essay was the section where West addresses Prisoner’s Dilemmas. After all, this series is devoted to this cooperation-related phenomenon. West describes a scenario where a lack of cooperation can arise from modern technology and dating norms:
“…Both Harry and Sally had a wonderful time on their date, but with modern technology, asymmetric information, and the prisoner’s dilemma, we see a breakdown of communication. We see that both Harry and Sally want to text each other and go on another date, but instead, the asymmetric information and the lack of cooperation in the game result in the prisoner’s dilemma. Instead of being straightforward and communicating punctually and politely, both Harry and Sally feel like they can’t openly communicate because of the asymmetric information about the other person. They don’t have a dominant strategy to play with each other because they do not know how the other person feels…”
Tilea certainly makes some shrewd observations in this paragraph, which inspired me to explore the prospect of additional Prisoner’s Dilemmas in the dating world. For example, could the Battle-of-the-Sexes game devolve into a standoff between mutually defecting players? Invariably this will lead us into the territory of the biological differences between men and women. The physiological, psychological, evolutionary distinctions between the two sexes play a crucial role in determining the mating strategies of heterosexual men and women. Once we strip away all the courtesy, social conventions, and other superficial attributes of dating, it is ultimately an intricate ritual at the center of the mate selection process. Most people can recall from previous anecdotes or even personal experiences the massive gulf between the mating interests of both men and women.
Mutual defection manifests in dating/sex because males and females possess incompatible “mating strategies”. If evaluated from the surface level, it would appear as if stable and monogamous relationships are untenable. Men frequently fall prey to the over perception bias. Where men tend to interpret often misinterpreting friendly female behavior as sexual interest; to avoid “… the cost of missed sexual opportunities…” (p.2). Per Haselton and Buss (2000), the costs of misreading a sexual opportunity are relatively low; when compared with the costs of losing a potential mate (p.3). The ultimate measure of genetic success is producing offspring. If mating opportunities are scant; this perceptual bias has a logical evolutionary function.
However, many theorists surmise that women have the opposite perception of mating opportunities. Females tend to be much more cautious in the mate selection process for one salient reason; women bear the costs of childbearing. In Haselton and Buss (2000), it is suggested that women underestimate a man’s level of investment in a relationship; he is more likely to demonstrate commitment to his partner (p.3). Overall, men rely on very liberal mating strategies, while women utilize conservative approaches to pair-bonding. Men have a lot to lose by not capitalizing upon potential mating opportunities. Women have a strong interest in guarding themselves against the high costs of promiscuity. Please note that this model excludes the variable of birth control for the sake of simplicity.
When viewing human mating strategies from the lens of a game-theoretical framework, there is unquestionably a Prisoner’s Dilemma. The conflicting mating strategies invariably lead to miscommunication and frustration among men and women. This mating conflict is depicted in a very two-dimensional nature in many sappy and cliché Rom-Com films. The archetypal freewheeling bachelor, being tamed by the female protagonist, attempting to cure him of his wild ways. Almost like a modern version of the sacred harlot taming Enkidu, but it is possible that making this analogy is too generous. The unfortunate fact of both sexes having opposing mating strategies is that it creates suboptimal results by increasing the transaction costs of courtship and sex. Most notably through miscommunication, but there are many other drawbacks incurred through the contending mating interests of men and women. These divergent approaches to mating have even engendered distrust. Some women believe that most men are only interested in sexual contact and not the emotionally deeper aspects of romantic relationships.
Anyone even vaguely acquainted with Game theory is familiar with the difference between cooperative and uncooperative strategies. While we have clear qualitative delineations between cooperation and non-compliant strategies, what differentiates players from nonparticipants in a game? Any administrator, judge, referee, or rule promulgator could arguably be a player in a game. Typically, these authoritative actors do not operate neutrally and have their incentives structure for their strategies for enforcing or creating rules. The actions of these high-status players have a profound impact on the potential outcomes of the game.
If an administrator can be a player, lower-status players choose to deploy uncooperative strategies against both the administrator and unprivileged players and the administrator. Any uncooperative strategy used against both regular player(s) and an administrator is an example of a Double-Defection Strategy. A mundane example would be in a household where a parent selects a favorite child. The unfavorable child could choose a behavioral strategy that defects concurrently from the parent-sanctioned rules and peacefully co-existing with their sibling. Therefore, creating conditions under which the child’s behavioral strategy defects from the administrator and the ordinary player.
The Johnson Act and Challenges to Class II Gaming:
Under the Indian Gaming Regulatory Act (IGRA) 1988, there are three distinct classifications of gambling conduct on tribal soil. Class I games are generally of little economic value to the tribes operating gaming establishments; are associated with intracultural ceremonies. Class I games are unregulated by any nontribal institution (p. 8). In contrast, Class II games fall within the range of bingo and associated games (tip jars, pull tabs, and card games) (p.3). However, any banking card games such as Blackjack and Baccarat fall outside of the category of Class II gaming along with traditional casino-style games such as slot machines (p.4). Class II games are free of state and federal regulation providing the form of gambling is not prohibited (p.1341). Pursuant to IGRA, the tribe establishes local ordinances governing the operation of Class II gambling. All local regulations need to be approved by National Indian Gaming Commission (NIGC) (p.1341). The final class of tribal gaming is Class III, including banked card games and traditional casino games (p.4). Per IGRA, the tribe must enact a tribal-state compact to provide Class III gaming services (p.305). Arguably, games such as slot machines are significantly more profitable than Class II games .
Over the years, some controversy has surfaced regarding what games fall under the umbrella of Class II games. Despite IGRA acting as a well-intentioned compromise, providing the tribes with the right to pursue gaming enterprises and balancing for safeguarding tribal gaming from criminal influences (p.2), it failed to foresee technical advances in the gaming industry. By the 1990s, digital aides to accompany Class II games such as bingo and pull-tab were devised, making them superficially similar to Class III games such as slot machines and video Blackjack. After years of length, court battles it electronic versions of Class II games are now recognized as distinct from Class III forms of gambling. Class III games incur substantial transaction costs of negotiations with the state the tribal territory resides within.
The attempt to prohibit electronic variations of Class II games, such as bingo, is justified by the Johnson Act. This law enacted before IGRA banned the use of gambling devices in establishments in the Indian country. The Johnson Act was soon challenged in the courts; by various tribes providing Class II gaming services. One prominent case was Citizen Band Potawatomi Indian Tribe of Oklahoma v. Green, 995F.2d 179, 179 (10th Cir. 1993). The Oklahoma Supreme Court affirmed the district court’s decision that video lottery terminals would not apply to the IGRA waiver of the Johnson Act since Oklahoma outright bans such gambling devices. The court sided with the state, but it did open the door for video pull-tab and bingo terminals by making such an exemption contingent on the state loosening restrictions on these actives. After the Citizen Band ruling, Oklahoma passed the Amusement and Carnival Games Act, this liberalized gaming in Oklahoma (p.7). Unfortunately, the tribes struggled to negotiate a compact much beyond expanding to off-track horse racing (p.8). The tribes were still languishing in a purgatorial dead-end from the pressure of the social conservatives of Oklahoma (p.8). The East Shawnee Tribe “…developed a paper pull-tab game that utilized an electronic reader to scan paper pull-tabs and display an image on a video screen when the machine dispenses the paper pull-tab..” (p.9). The tribe circumvented their gaming commission and requested a ruling from the CFR court. The CFR’s favorable ruling did not dissuade the U.S. Attorney Lewis of the Northern district from viewing “…such devices as an unlawful class III electromechanical facsimile of a pull tab game..” (p.9). Subsequently, the District Court ruled that this variant of an electron pull-tab game was a Class III game (p.10). The U.S. Attorney Lewis ignored the ruling raided the tribe’s casino. The East Shawnee and the government came to a settlement dismissing the charges and returning all seized funds (p.10).
In 1996, the NIGC chairman decided that the “..electronically broadcasted bingo game…” MegaMania was a Class II game (p.10). Then in 1997, the DOJ and Oklahoma tribal leaders met to discuss the limits of electronic bingo games while the NIGC concurrently expanded the list of electronically assisted games that fell within the Class III category (p.10-11). Lewis ignored this decision and organized a raid on casinos owned by the Seneca-Cayug and Cherokee Nation. Lewis also went so far as to pursue a case against MegaMania devices used at tribal establishments in California (p.11). Resulting in United States v. 103 Electronic Gaming Devices, No. 98-1984-CRB, 1998 WL 827586 at *10 (N.D. Cal. 1998). The Ninth Circuit threw Lewis’s case out citing that the interconnected terminals were an aide and therefore was Johnson Act compliant. After several years of appellate courts finding that IGRA permits Class II games to utilize electron aides, NIGC made the 2002 amendment to IGRA formally codifying this conclusion (p.12).
The Obvious Prisoner’s Dilemma:
The long and drawn-out battle over the classification of tribal-hosted electronic-aided bingo games is a clear example of how the interests of bureaucratic agencies do not always align. Bureaus function under the auspices of the same department, compete for funding and institutional support. This situation demonstrates a scenario where orthogonal agencies are at odds; due to having diametrical incentives structures. The NIGC was intended to operate with constrained autonomy when IGRA was first enacted. But NIGC independence is significantly hampered by the shared regulatory responsibility dispersed between the agency, the Department of the Interior, and the DOJ (p.305-306). As is evident from the previously described struggles for tribes in Oklahoma, the relationship between the NIGC and the DOJ is contentious.
A Prisoner’s Dilemma exists because the DOJ exists to offensively combat illegal activities associated with improper operation of gaming facilities (p.323). Simultaneously, NIGC solely exists to provide an on-ramp for tribes to seek liberalization of gaming for economic development (p.323-324). Neither of the incentives structures is compatible; this can explain the ample examples of defection on the part of both parties. The NIGC actively helps the tribes by expanding the number of games utilizing electronic aides regulated as Class II (fewer legal hurdles). In contrast, the DOJ enforces the gaming laws, even if that means taking overly broad or narrow interpretations of the current statutory code. Both government entities could have coordinated mutual compromises versus adversarial strategies for managing tribal gaming regulations. This lack of consensus generated a multilayered cat-and-mouse game between the NIGC/tribes and the DOJ.
The Distal Prisoner’s Dilemma:
The less conspicuous Prisoner’s Dilemma is an intertemporal one involving one set of congressional representatives versus another. The Johnson Act and IGRA are incompatible pieces of legislation that generate intricate policy conflicts (p.315-318). Since the two laws are incongruent, IGRA is a defection from the previous Johnson Act. In IGRA, it is implied before the 2002 amendments that the electronic aides were exempt; it was not clear enough to dispel any controversy. Either clarification of the exemption in the original law or having it match more closely to the criteria of the Johnson Act would have been a “cooperative strategy”.
A Distal Prisoner’s Dilemma is an indirect mutual defection that engenders poor outcomes. The defections are generally temporally stratified and are not an instantaneously implemented noncooperative strategy. Either through congress’s ignorance of the law or zealotry to regulate tribal gaming, they are working against their own previously established legislation.
Per a 2020 study, approximately 70 % of all surveyed parents admit to preferential treatment to one of their kids. The context of this biased parenting can range from intentional behavior to subconscious reflective behavior; such dynamics create a perverse incentives structure for the parent’s children. Despite this fallacy being prevalent, that does not eliminate the harm that it inflicts upon family dynamics. Anytime incentives are aligned for two people to work against one another, there is a strong potential for a Prisoner’s Dilemma. However, since each “player’s” incentives align with defection doesn’t mean that such strategies yield optimal outcomes. The same holds when it comes to interactions among family members.
Two notable defection strategies are implemented in sibling rivalries. The first salient strategy would be both siblings pitted against one another, vying for their parent’s affection. The two siblings simultaneously attempt to win the praise of their parents. Even if that means that they do so at the expense of their brother or sister. One example would be highlighting the shortcomings of the opposing sibling and comparing them to their achievements. For example, one sibling emphasized their straight A’s, and their brother Johnnie is a C-student. Based upon the author’s anecdotal observations, this is the most common form of noncooperative strategies implemented in sibling rivalries.
Another strategy that is slightly less common; but mildly prevalent is the double defection strategy. In this game-theoretical framework, the disfavored sibling does not attempt to conform to the expectations of the biased parent. The disadvantaged sibling opts to defect by rebelling against the rules and norms of the household. The recalcitrant sibling effectively defects concurrently from both the favored sibling and the biased parent; by defying the parent and taking a hostile stance against their sibling. However, both siblings could work together to create a more harmonious household. They could work together to evenly divide the chores around the house and stick up for one another when one parent is being too harsh on the other sibling. Instead of allowing the chaos of competition to fray the relationship of the family members.
The event of toilet paper shortages of March 2020 was our societal initiation into the peculiar COVID-19 era. Now that we are currently facing global supply-chain shortages, people are once again starting to engage in hoarding behavior. The attempt to accumulate scarce goods when confronted with shortages is an understandable response. However, is it a good strategy? From a superficial standpoint, hoarding seems like an optimal strategy, especially when assessing the present market conditions. But being fixated on the current supply shortages does not take into account downstream consequences of hoarding behavior. Whether it is the toilet paper shortages of 2020 or the current supply shortages of 2021, all supply shortages present us with a Prisoner’s Dilemma. This observation is most likely true of all supply shortages past, present, and future.
By definition, a Prisoner’s Dilemma is a situation where players (in this scenario shoppers) believe it is in their best interest to adopt noncooperative strategies; but create suboptimal results. For example, consumer’s hoarding scare commodities can have the following consequences:
1.) Consumers’ opting to hoard a scarce product will only exacerbate current shortages.
2.) The intensified stress placed on the supply chain from hoarding will be reflected in skyrocketing prices (absent any price control measures, e.g., price gouging laws).
3.) Private firms may decide to place purchasing quotas on specific scarce goods.
4.) The increased potential for violent interactions when attempting to obtain scare goods.
While many people may think buying every last roll of toilet paper is a good strategy, several potential ramifications suggest otherwise. Hoarding results in forms of strategic purchasing that pits shopper versus shopper. Consequentially, engenders many social and economic externalities.
As economist Thomas Schelling astutely points out in his paper Egonomics or the Art of Self-Management (1978), people are often conflicted in their decision-making by current satisfaction and long-term goals. Since these goals are contrary, it is almost like two different people exist within the same person, the present and future version of ourselves. Both variants of the same person have stratified along a temporal chain of life events influencing the current decision-maker. The current version of ourselves can only anticipate but not fully know what our future self would prefer. We can only do the best we can to contend with potential future wants and current desires.
Since we are navigating the clashing wants and needs of our future versions of ourselves with our current self, this seems to resemble an intrapersonal collective action problem. Traditionally economists have viewed collective action problems in the context of political decision-making. An individual is vying between current wants and future goals; in their decision-making, there is a potential for both sets of objectives to be at odds. A person is then susceptible to be indecisive or making concessions that find a middle ground (intrapersonal logrolling) between current and future aspirations.
In-game theory, the concept of a focal point is a conceptual locus of convergence in the absence of pre-arranged communication. Generally, these mutually agreed-upon center points are culturally contingent. Although, there is one focal point that transcends culture and is arguably the ultimate point of unspoken convergence; that is truth. Some social commentators claim that truth is relative, quickly dispelling the argument that truth is a universal focal point. The facts are the facts. When something is axiomatically true, it is self-evident. To claim that truth is subjective is a puzzling assertion. We cannot simply deny the laws of mathematics, then suddenly, the rules governing the order of operations become invalid. The assumption of truth being subjective confuse methodology with results. Pluralism is valid so long as it reflects the truth. For example, there are multiple ways to solve an equation, but only one correct answer.
When people formulate rules, they must do so in a manner congruent with the immutable laws of the social and natural sciences. Otherwise, we will fall victim to the natural consequences of violating these eternal laws. Truth is such a magnetic focal point that it is inescapable. Sure, it is possible to contrive a convincing delusion, but while delusions may dissolve, the truth remains fixed. Regardless of whether we are truth-orientated immutable facts pull us in like the force of gravity bringing us back down to Earth. We can fight gravity; however, even when interpersonal communication is absent, any semi-rational person already knows that such resistance is inevitably futile.
The game-theoretical concept of a “Prisoner’s Dilemma” applies to situations where no overt defection has occurred. Many readers may be perplexed by this assertion since, by definition, Prisoner’s Dilemmas entail “players” selecting uncooperative strategies. However, there are scenarios where the selection of a specific approach could lead to non-optimal outcomes. But such a strategy would not be considered a direct form of defection. These strategies are analogous to a defecting because the participating economic agents are moving away from a given focal point; rather than converging upon it. Even though the participants are not directly undercutting each other but inadvertently select noncooperative strategies. One salient example of this is any situation in which both parties choose to lie to the other. Both agents believe it is in their self-interest to obscure the truth, but doing so will only engender more problems.
A novel application of this theory would be in job interviews. Why? The hiring manager and the applicant concurrently have incentives to distort the facts. The prospective employee stands to benefit from embellishing their credentials. Likewise, the hiring manager might think it is shrewd to exaggerate or overemphasize the company culture when it is difficult to find a qualified candidate. When used in unison, the consequences are disastrous. The new employee will not be unqualified for the position and will also have unrealistic expectations for the job role. Ultimately, creating more issues for the hiring manager and the jobseeker. Telling a lie may not be a direct form of uncooperative behavior, can often yield similar results.
The headlines in the news have been animated by the controversial Texas law, SB 8; colloquially known as the Heartbeat Bill. The legislation boasts several stringent limitations on abortions that operate analogously to a de facto ban. However, the most shocking aspect of the bill is that it allows private citizens to sue facilities that have performed abortions for $10,000 or more per procedure. This feature of the law indirectly deputizes the residents of Texas and has the potential to lead to some unforeseen consequences. At its core, the Heartbeat Bill is a legal manifestation of the partisan tug-of-war in the abortion debate. While Pro-Life advocates may believe they have won this round, little do they realize Texas now has a Prisoner’s Dilemma on its hands. The blowback from this contentious  the legislation will impose economic costs on the state of Texas.
It is worth noting that only a minuscule number of the citizenry in Texas has had an abortion. Per the Guttmacher Institute, in 2017, only 55,440 Texas residents had abortions performed. This figure is meager when compared to the total of all adult female Texans. Also, most voters are conservative. How could this move be detrimental to the entire state of Texas? The state only has a few liberal oases (West Texas & Austin); the overall impact of citizens moving to more progressive jurisdictions would only have a marginal effect on tax revenue. Perversely, this might have a disparate effect, leaving left-leaning municipalities such as Austin with a significant loss in local tax revenue.
Texas having lower taxes and an affordable cost of living has resulted in population growth in recent years. Population growth and economic growth are correlated. Most of the Texas transplants are not coming from conservative-leaning states, but liberal high tax states such as California and New York. Arizona is another state currently experiencing a large diaspora of Americans migrating from high-tax states. Epitomized in the slogan “.. Don’t California, My Arizona..”. What happens when the conservative values of a low tax state become too off-putting for prospective residents? Not only hampers the economy through decreased tax revenue, but it hampers economic development in other ways. Left-leaning Tech Companies may enjoy the corporate tax rate of Texas. What happens when companies start choosing to avoid setting up offices in Texas for ethical reasons? More companies may opt to establish a campus in Phoenix instead of Austin. Causing an unfortunate ripple effect through the entire state economy. The Pro-Life camp is not doing themselves any favors by not striking a political middle ground. Progressives are only shooting themselves in the foot by avoiding Texas because of the Heartbeat Bill.
1.) This brief essay is in no way a commentary on the morality of abortion. Any such normative arguments would only detract from a game-theoretical assessment of the situation described.
At the center of every social interaction is some variant of exchange. Whether it be friends trading pleasantries or vendors and clients exchanging money for goods; every social interaction is an exchange. For this very reason, it is perplexing how once money enters the picture the interaction has been ethically tainted. Surely, examples of bribery have many moral considerations to address. However, the disdain expressed for people who monetize a hobby is devoid of any justifiable logic. In a sense, even the exchange of nonmonetary goods such as ideas and goodwill can be abstractly viewed as a form of commerce. Much like bartering goods and services, the trading of ideas tends to make people better off. Why should the exchange of ideas enjoy the moral high ground while trading tangible goods for money is treated with ethical inferiority? Odds are that will be a question for another day.
It should be noted that nonmonetary interpersonal exchange extends well beyond interchanging nontangible ideas. It can also apply to displays of affection. One form of interpersonal exchange that seems to be most salient in the minds of people would be sexual intercourse. Outside of the deeply ingrained biological proclivity to crave sexual contact, such acts have been mystified by being shrouded in a mystique of societal taboo. Only serving to make anything about sex more alluring; sex being nothing more than “..forbidden fruit..”. Especially when it is outside of the contexts in which is societal prescribed is being permissible. Irrespective of the context in which sexual intercourse takes place, if it is consensual, it is a form of exchange.
Even in instances where sexual relations are consensual, such interactions among co-workers operate in a moral grey area. Most Human Resource departments frown upon such conduct, but rather ever outright condemn it or impose disciplinary action. However, once the exchange is between various tiers of management and their subordinates any appeal to the morality of such an interaction becomes more dubious. Not fixate on equalitarian concerns, but there is an institutional asymmetry of power. An individual’s boss has quite a bit of authority over them. After all, having the power to sever someone from their ability to earn an income is a lot of power to wield. An individual’s boss can also influence the trajectory of one’s career. Introducing sex into the mix spells a recipe for calamity.
An hourly employee having a sexual relationship with their boss is a prime example of a prisoner’s dilemma. Ideally, both parties or either individual would decline to engage in any sexual conduct. As we all know the world, we live in is far from ideal. Even if it were to happen, to not allow the incident to influence any aspect of their professional lives. Again, humans are emotional creatures. When David Hume described the servile relationship between people and their passions, he was correct. Unfortunately, such an incident cannot remain neutral, almost always bleeds into other the work life. Regardless of whether the exchange occurs on or off company property.
It would be in the best interest of both individuals to move on from their regrettable tryst (or chronic series of amorous activities). That would defy human nature, even if it would be the rational course of action. There is the ill-fated inclination of people to weaponize such situations for their interests. Falling into the categorical definition of a Prisoner’s Dilemma. The manager could threaten to demote their subordinate or even fire them if they tell anyone about their affair. The same penalties could also be applied if the subordinate decides that they are no longer interested in continuing the sexual relationship. Reciprocally the subordinate could also fight fire with fire. Deciding to use the sexual encounter as a point of leverage for either reprisal or career advancement. Opting to seize this opportunity and continue this unethical relationship with their boss. Even in some cases using past encounters as the focal point of an extortion or blackmail attempt. Either individual using their past rendezvouses in a manner that will harm the other is an unquestionable noncooperative strategy. The key factors of lacking trust and the institutional/moral disapproval of such engagements are conducive to defection. If you can’t rely on the other to be cooperative and work in everyone’s mutual interest, you might as well save yourself.
Social interactions generally constitute a series of various exchanges. Most instances of social exchange are typical non-economic. Whether it is two lovers on a stroll through the park exchanging affection through a kiss or a couple of friends trading pleasantries. Neither interaction involved an exchange of goods or money. Rather these individuals are trading intangible goods. Mutually shared friendships, trust, love, compassion, and even an intermingling of ideas cannot be easily quantified in the way products, services, and currency can be. Nevertheless, there is still value to these abstract fixtures in the realm of social engagement. A salient example of an attempt to categorize “social goods” is embodied in the term social currency.
Anytime there is something to gain, in the terminology of Game Theory a payoff, the potential for a Prisoner’s Dilemma exists. This is regardless of whether any tangible payoffs are possible. At the root of any exchange is trust. In the absence of trust, there is are no clear incentives for cooperation. This leads individuals to utilize uncooperative strategies. Once again borrowing the nomenclature of Game Theory, results in defection. Hence why the sections of American antitrust law focusing on collusion are fruitless. Why? Cartel arguments are tantamount to a textbook example of a Prisoner’s Dilemma, one of the firms always ends up reneging.
One common example of a Prisoner’s Dilemma experienced by most people is encountered in customer-facing interactions. Either as the client or as the vendor. This may sound like an unrelatable, highly sterile, and corporate description of this social dilemma. However, if you have ever been a customer you have experienced this predicament. Whether it was coping with a rude waiter, exhausting your patience with a clueless clerk, or getting hung up on by a call center rep, we have all endured this social dynamic. Naturally, we are right. After having the platitude “… the customer is always right…” seared into our subconscious, how could we ever be at fault? This hubris makes us the perfect reciprocal agitator.
The vendor has little incentive to be cordial and helpful when interacting with the client. The Client has little incentive to be civil to the hourly customer service representative assisting them. The client questions their capabilities and possesses a sense of entitlement. There is a huge caveat to this contingency. Both parties are willing to tolerate a certain amount of aggressive interactions before arriving at the tipping point. Firms being constraint by profit-loss mechanisms, employees implicitly understand that there are certain lines that you do not cross. Once you start costing your employer money, you are as good as gone. Vice versa, a customer service agent will only tolerate so much abuse before they quit.
Despite the customer service representative lacking faith that the customer will be cordial. The customer not trusting the abilities and intentions of the customer service representative leads to suboptimal results. Adopting either strategy is a form of defection. Both parties doing so concurrently results in a Prisoner’s Dilemma. In the context of business dealings, more than money and goods are being exchanged. Trading partners are trading on faith and goodwill. This extends beyond the linear money for goods dynamic that most people superficially ascribe to commerce. As the old saying goes business is a “… two-way street..”. Sure, the ludicrous demands of the customer can take primacy, however, if the interactions become too onerous the vendor may elect to drop the problematic client. At the same time, if the vendor does not accommodate the customer and is providing an inferior product, then they have every right to be irate.
The social dynamics of the workplace often provide ample examples of applied Game theory. Whether or not individual co-workers are deliberately implementing strategies based upon research in the field is questionable. For people who possess opportunistic proclivities, it seems as if they have an implicit understanding of game theoretical strategies without being familiar with the formal concepts. Most of the ambitious employees posed to ascend the corporate ladder are always making calculations. Like the political process the aspiring network and form alliances. They tactfully engage in subterfuge to place another contender vying for that prized promotion at a disadvantage. Sometimes the professional “gamer” will even leave a subtle calling card. I once encountered a manager who inserted a quote from the Art of War into his signature. Feeling particularly brazen I decided to ask him if he has ever read the book. He did. It came highly recommended and was told that he likes to apply it to business. I quickly distanced myself from this gentleman. I prefer to avoid Machiavellians.
The unfortunate reality of maintaining gainful employment is that it is a game. Even to remain employed never mind advance within the company, you will need to adhere to the rules of the game. You must adapt to the social norms of your employer. Each decision we make at work can constitute a strategy. Co-workers are merely our fellow players. The results whether it be obtaining a promotion, getting Jim fired, or flying under the radar would function as a payoff. Completely comprising the core variables of a game-theoretical definition of a game. Once we consider the incentives structure of the workplace it becomes quite clear that from an individual’s perspective it is frequently a noncooperative game. Yes, we do need to cooperate to get the process improvement project done. However, there can be various terriers of games simultaneously occurring at one time. It is important to remember only one person can fill that manager spot! The work-related “game” may be cooperative and productive while the interpersonal exchanges could be hostile.
Since there is a high potential for the implementation of noncooperative strategies, there is also a high probability for Prisoner’s Dilemmas. An individual being consumed by their agenda can make them blind to the fact that cooperation could be more effective than working against one another. Hostile strategies tend to waste resources and time. This example of misallocating resources is in of itself suboptimal. An individual’s effort and time could be re-direct completing a concrete goal. Rather than delving into the darkest depths of psychological warfare or other manifestations of non-cooperative strategies. The typical office environment is an environment rich with examples of Prisoner’s Dilemmas.
A prevalent example of a common Prisoner’s Dilemma that occurs in the work environment is job role training. It is evident that if you properly train a new co-worker that it is all around beneficial for everyone. It would even be fair to categorize properly training new employees as a positive-sum strategy. It creates less work for the trainee down the road to have an efficient and competent co-worker. It provides the trainee with a strong procedural foundation and will alleviate their frustration later. However, both “players” are prone to acting in a shortsighted manner. The trainer frustrated having the task of training the new person to their workload may do a cursory job explaining the intricacies of various processes. There may even be a deeper-rooted rationale behind the trainer’s apathetic approach, latent hostility. The trainer may perceive the new guy as a potential threat. Either due to him exposing tactics utilized to mask a light workload or even his natural aptitude. The idea of the new employee excelling and surpassing the trainer could be a possible concern. There is also the situation of the trainer having to train their replacement in the event of layoffs (yes, it happens). The reasoning for hostility in this scenario is self-evident.
Once the trainee is faced with the less than welcoming disposition of their trainer, odds are they will also adopt a noncooperative strategy. Even going so far as to retaliate against their trainer by reporting the aggressive behavior to their manager or H.R. department. The trainee has little incentive to work with the trainer as they have already committed to being uncooperative for arguably petty reasons. Only serving to create a quid pro quo series of personal or institutional retaliations. The trainer could start a rumor about the trainee, in an attempt to damage their reputation. The trainee could continue to escalate the involvement of various tiers of management and H.R. personnel. Regardless of which methods of retaliations are deployed by either party, no one is truly better off. Time and effort have been squandered through the course of the petty bickering. The new employee still is lacking adequate training. The trainer being too shortsighted to see that properly training their new co-worker would effectively lighten their workload downstream.
The game-theoretical concept of focal points is not limited to merely military operations or talking points in public policy. Since focal points are context contingent, these unspoken points of convergence can be found in a multitude of different environments. Not to mention also in a plethora of various applications. An often-overlooked arena for Schelling points would be product marketing and labeling. Frequently, there are context-specific indicators of quality specified in product advertising and labeling that denote quality. Generally manifesting themselves in the forms of descriptions, categorical labels, and even lists of awards/certifications exalting the product’s superior safety or quality. All are designed to communicate that the product is of a certain caliber in the absence of additional information. Indicators that signal product quality without the consumer having to read a litany of reviews or conduct further research.
The unspoken barometer of product quality is often esoterically buried in the product labels. This is particularly true for luxury products. The term “esoteric” is applied to the interpretation of the product descriptor from the point of view of the uninitiated. For example, a novice scotch drinker may reach for a bottle off of the liquor store shelf that reads “Single malt Whisky”. An individual new to imbibing Scottish whisky may not know what this foreign phrase signifies. However, a seasoned consumer not only understands what this phrasing means. But he may also view these terms as a designation of a quality whisky. Even if this experienced whisky consumer has never heard of the brand or distillery producing the beverage. Nor have they read or watched any reviews assessing the product’s quality. Essentially making this designation on the label a context-specific point of convergence. Despite the product quality not being directly communicated.
When it comes to top-shelf liquor these subtle indicators are not limited to bottles of whisky. Prized bottles of cognac, rum, vodka, etc. all possess understated markers of quality on the label. One salient example of this would be on tequila labels. A quick rule of thumb,if you are ever looking for a bottle of tequila make the label states “100 % Blue Agave”. What does this mysterious designation mean? This classification indicates that tequila is made from blue agave. Agave is the primary sugar base distilled to make tequila. When a tequila fails to meet these requirements is referred to as being “mixto”. Virtually no tequila that meets this categorical definition proudly adorns this designation on its label. By legal definition a tequila that is “mixto” must contain 51 % blue agave liquor, the rest of the constituents generally include low-cost fillers. Some examples of these adjunct ingredients include “…caramel color, oak extract flavoring, glycerin, and sugar-based syrup…”. Typically resulting in poor tasting and overall inferior tequila. One prevalent tequila fitting this category of this distilled beverage would be the infamous Jose Cuervo.
There is a battle brewing in Arizona. The municipal government of Tucson is looking to enact gun control ordinances that are contrary to Arizona state law. The city passed a resolution requiring federal gun laws to be followed within Tucson’s city limits. From a superficial standpoint, this does not sound so radical. As any careful observer of the Arizona political scene can tell you this outright rebellion. Arizona has always been a very 2nd Amendment friendlily state. Back in April, Governor Doug Ducey signed HB 2111. The bill prevents any institutions from utilizing state resources or promulgating rules that violate state gun laws.
“…Specifies that pursuant to the sovereign authority of this state and Article II, Section 3, Constitution of Arizona, the state of Arizona and its political subdivisions are prohibited from utilizing any financial resources or state personnel to administer, cooperate with or enforce any law, act, order, rule, treaty or regulation of the federal government that is inconsistent with any law of this state regarding the regulation of firearms…” (HB 2111).
Many outside spectators may view this measure by Arizona lawmakers a superfluous or even paranoid. Objectively, there has been a precipitous erosion of gun rights over the decades. Generally resulting from a tightening of federal gun regulations. One only needs to look towards the Brady Handgun Violence Prevention Act (1994) and subsequent laws to see this pattern emerging. Although, most gun enthusiasts would most likely reason that this pattern emerged before 1994. However, this legislative game of red rover isn’t an illusion caused by the slippery-slope fallacy. It is also important to not frame the legislative encroachment of the 2nd Amendment as devolving into a frenzied conspiracy climaxing to a dystopian gun grab campaign.
Arizona lawmakers not being quite so sanguine about the Biden administration’s respect for gun rights is understandable. Especially when you consider his platform regarding gun safety, which seeks to impose more restrictions. It is well known that the City of Tucson has been at odds with state gun laws for a while, being an uncharacteristically left-wing city in a conservative state. The state legislator fearing that Biden would tighten up federal gun regulations they drafted HB 2111, effectively making Arizona a “2nd Amendment Haven”. The state of Arizona is not alone in drafting us preemptive measures as several other states have drafted similar bills.
The officials of the City of Tucson have stated that if the state government intervened they would take it up with the federal courts.
“….Steve Kozachik, the councilman who introduced the resolution last month, said he believes the state’s sanctuary law to be unconstitutional.
Insinuating that under the Supremacy Clause of the U.S. Constitution the city would have the higher ground from a legal standpoint. Because the Supremacy Clause states that federal law supersedes state law. Even the causal jurist knows that U.S. Law is complex and riddled with a plethora of loopholes. Holding such an axiom as unwavering is at best an overly simplistic interpretation of the law. It should be noted that the Supremacy Clause was intended to apply to the promulgation of laws in the scope of congress’s enumerated powers. After re-reading Article I, Section 8 several times, I simply could not find a sentence, never mind a paragraph conferring the power of formulating gun control laws to the federal government! Nevertheless, when Tucson petitions their complaint to the SCOTUS it will make for an entertaining case, to say the least.
It is important to remember that the state government does have a very compelling bargaining chip for negotiations. That is state tax dollars. The city of Tucson does receive a portion of tax revenue from the state (like most municipalities do), the state of Arizona could very well withhold these funds as a condition of noncompliance. It is estimated by going rogue on the gun issue, the city stands to lose “… half of its state shared revenue..”. The conflict here is the typical example of conflicting political interests at various layers of the political hierarchy. Mirroring the conflicts between the federal and state governments. Because both factions have divergent interests, rather than compromise both groups prefer fighting to the bitter death. Gun control like most wedge issues has a winner-take-all payoff. Primarily due to political polarization. However, losing ground policy-wise does turn into a slippery slope quickly. Incrementally evolving into long-term losses.
Since the incentives structure is skewed towards winner-take-all payoffs, neither party can trust the other in the event of a compromise. Completely dispensing with any good faith bargaining; leaving logrolling off the table. This lack of good faith between the state government and the city of Tucson creates fertile ground for a Prisoner’s Dilemma. A Prisoner’s Dilemma is a concept in game theory where individuals working together could produce better results than working against one another. In certain situations, if both parties lack trust, they will defect and work against the other individual. Paradoxically, both actors would be better off if they worked in unison. If both Tucson and the state government brokered a deal with some carefully considered concessions, everyone would be happier. Instead, they both would rather hardball a gluttonous attempt to have all of their policy preferences fulfilled. Does nothing more than waste resources and generate more drama.
One of Thomas Schelling’s best-known contributions to Game Theory was the concept of a focal point. Otherwise known as “Schelling point”. What is a focal point? We oftentimes hear the term being thrown around colloquially in various settings. Ranging from office board meetings to pundits on network news stations. The common definition of the term slightly differs from its connotation in Game Theory. The common definition of a focal point connotes a point of convergence. A central point from which all other connections radiate. This definition isn’t antithetical to how the term is used in Game Theory. Since most of these assumptions are implicit in the game-theoretical definition. A focal point from Dr. Schelling’s perspective operated as a conceptual bridge in the absence of clear communication. A focal point bridges the gap between information asymmetries when correspondence is lacking.
A focal point is particularly important in what is known as a coordination game. Simply put, coordination games are situations where the players benefit from assuming the same course of action. It can be assumed that in such scenarios nash-equilibrium is faithfully upheld by all participants. Because all players are conforming to the behavior of their opponents. Schelling’s conception of focal point may be applicable even in scenarios outside of the context of coordination games. A focal point could also be seen as a cultural-contingent point of reference, that can serve as a beacon of hope in contextual circumstances fraught with ambiguity. There are certain locations, times, dates, and people that serve as focal points to individuals of various cultural groups. The recognition of these focal points functions on a continuum ranging from locally acknowledge focal points to internationally renowned points of reference. A local bar may be a focal point to residents but in contrast the Panama canal a world-renown point of reference. While Schelling points may be an ingrained feature of coordination games we do see them peppered throughout our daily lives.
In Schelling’s seminal book The Strategy of Conflict (1960) the Nobel laureate details one of the most widely cited examples of a focal point in game theory.
You are to meet somebody in New York City. You have not been instructed where to meet; you have no prior understanding with the person on where to meet, and you cannot communicate with each other. You are simply told that you will have to guess where to meet and that he is being told the same thing and that you will just have to try to make your guesses coincide. (Schelling, 1960, p. 56).
The only tool at your disposal would be to use a common point of reference in the lack of proper information be a common point of reference. In London, England it may be a shrewd strategy to meet at the Big Ben clocktower. However, opting to meet at “Big Ben” in NYC would be wholly inappropriate. A better potential meeting place would be the Empire State Building. In the absence of any cultural context, this task becomes nearly impossible. Without any cultural consensus, it becomes difficult to ascertain what is a crucial landmark. Not only consensus required but also the ability to rank the salience and notoriety of the location is necessary. Your favorite coffee shop in Greenwich Village maybe your favorite location in all of the city, but odds are you wouldn’t find the other “player” at this location in the absence of clear communication. These broad approximations are far from perfect science. One “player” waiting at Central Park and the other waiting at the Empire State Building are rational strategies. Both players missed the mark.
The conventional definition of a focal point isn’t completely different than how the term is used in Game Theory. From a game-theoretical standpoint, does have a “centering effect”. It serves more to operate as a tool to navigate the perils of imperfect information, rather than a noun describing the spatial origin of the reference point or a clumsy synonym for a talking point. When properly estimated by coordinating actors it does effectively operate as a point of convergence. It is just a matter of fine-tuning the location.
The abortion debate is arguably one of the most oversimplified contentious issues in all of public policy. The intricacies of navigating the legal statutes and case precedence that shapes the regulations governing the practice are oftentimes are glossed over in public discourse. This rash reductionist approach has shifted a complex topic into a simple categorical dichotomy. Easily making it a fervent “wedge issue” that has formulated many pithy platitudes and “bump-sticker slogans”. These slogans which are so pleasing to the ear could have effortless you contrived by a marketing team. All operate more like a carefully constructed marketing campaign than a multi-disciplinary analysis. This not only makes the abortion debate stale and uninspiring but highly predictable because both sides of the fence utilize an “all-or-nothing” strategy of argumentation. This is highly imprecise for a subject that is steeped in nuisance and minuscule details. Below is the list of disciplines that intersect in the abortion debate:
If a pertinent area of study was neglected, I sincerely apologize. However, while not completely exhaustive, this list conveys exactly how complex the issue is. The intersection of all these vast areas of study converges on a single point, the refutation or the defense of Roe V. Wade (1972).This one case has become the quintessential Schellingian focal point in the abortion debate. Potentially providing some insight into why the debate is so one-dimensional.
Staying within the structure of methodological individualismit is important to see how Smith’s Pin factory example (p.54-55) exemplifies the coordination of a group of economic agents. All working in unison towards the common goal of producing pins. All of these individual works comprise the overall assembly line. The totality of all the adjacent departments related to manufacturing makes up the internal structure of the firm. Any social institution whether it be a hobbyist club, social club, buyers club (e.g. Sam’s Club, BJ’, Costco), government, business, trade association, private governing bureau/authority (e.g. homeowners association), charitable foundation, research institute, study group, etc. are comprised of multiple individuals forming the group. It is flat-out erroneous to speak of the entire organization without any consideration for its members. The collective action of all the group members acting harmoniously to achieve the same ends is much more complex than treating these collective efforts as lumped together aggregate.
Each member of an organization has their internal objectives, thoughts, feelings, and desires. It can be said that all the active participants have their utility functions (p.25-26). Meaning that to some extent their wants, needs, and desires align with the overall group goals. For example, very few people like their jobs, but they voluntarily consent to the terms of employment because of their desire to earn money. Whether it is for the intrinsic satisfaction of possessing money or what currency can be redeemed for. Keeping within the theme of a Smithian analysis of social institutions, it is important to note that more than tangible goods are exchanged through interaction with others. We exchange ideas, culture, skills, knowledge, friendship, guidance, sympathy, morality, and moral support among other forms of desirable forms of social currency. Political activities tend to be a form of social association that is frequently marred by corruption and various forms of abuse. However, is the dynamic of politics overtly a zero-sum game? Not necessarily. As it can be viewed as a form of exchange, individual actors engage in various exchanges for mutual benefits (p.25). One example being logrollingthe practice of lawmakers trading votes/favors.
The intangible exchange of social commodities cannot be understated in formulating effective working relationships. One crucial assumption of Smith’s Theory of Moral Sentiments (1759)that we seek the “approbation” of others. In other words, we seek to praise and approval from others. We are constantly seeking the acceptance of our peers. Being well-liked on the individual level wields a significant amount of social currency. If the ability to seek acceptance and cooperation is applicable on the individual level, couldn’t it also apply to the harmonious relationships between groups of people? After all the scope of social and economic interactions operates on a continuum of scale, what is applicable on a minuscule level should also work on a larger scale. The principle is a general maxim governing social interactions, therefore it should be transferrable. One of the best ways to overcome cultural barriers is through finding a form of social exchange desired by both parties. It does not mean that it must take the form of economic exchange. It possibly manifests itself in alliances and treaties among nations. Special agreements, pacts, contracts among nonpolitical social units. Most often it takes the form of economic trade between foreign nations. The necessity of unilateral trade agreements is refutable. Consumer sovereignty is the true impetus of international trade. Despite the bluster and theatrics of vociferous diplomats and other garden variety elected representatives.
Why voluntary association over other coercive means do we yield harmonious interactions? There isn’t a magic bullet answer to this question. However, some insights from Public Choice pioneer Gordon Tullock may help elucidate a potential variable that sheds some light on this occurrence. It is the ability to choose our partners in voluntary social arrangements that reduce the instance of Prisoner’s Dilemma. If our trading partner is not being cooperative, we can easily do business with someone else. Because of the mobility of free association (which is purportedly protected under the First Amendment) we do not need to be held captive by aggressive or hostile social relations. Due to this consideration, it is easy to see the original sentiment behind antitrust laws, but much like all laws, they suffer from loopholes and other issues. Even from the standpoint of the definition of a monopoly. One of the common attributes of monopolistic market behavior is assessed by is market concertation. However, this is problematic how do we determine which market is categorically correct for the assessment of market concentration? Nevertheless, we can freely choose our partners whether in trade or other forms of social situations it reduces the occurrence of the perverse incentives to be noncooperative. Sullying our reputation deprives us of the esteem that Adam Smith surmised we all crave.
Considering that trade is one of the forms of association that fosters cooperation. Even if free trade is not the key to world peace, it still makes us less apt to raise the sword to our geographic neighbors. To repudiate the previous administration’s trade policy, international trade should be encouraged. It is only natural to perceive David Ricardo’s concept of comparative advantage as an extension of Smith’s pin factory. The premise of comparative advantage is that it can make production global and explains why we tend to import higher-order goods to produce commodities domestically. No one climate can best produce glass, grapes, and corkwood in the Cognac region of France. However, all of these components are required for assembling a commercially produced bottle of Cognac brandy. This specific region in France has some of the best grapes in the world for brandy production. The climate is wholly inappropriate for cultivating and harvesting the wood used in the stopper placed in every Cognac bottle. To avoid placing great restrictions on our ability to manufacture sophisticated goods, we need to trade with other nations. We can only truly achieve this through peaceful relations. Free trade in itself helps to facilitate peaceful relations.
Public Choice founder Gordon Tullock in his paper Adam Smith and the Prisoner’s Dilemma (1985) applies a game-theoretical lens to the Smithian assumption of “the discipline of continuous dealings”. In other words, the famous game theory trope of the Prisoner’s Dilemmaactually substantiates the idea that vendors are less likely to cheat customers if there is the chance of repeat business. Often in a Prisoner’s Dilemma, there is a strong incentive for defection, as we do not know how the other person will respond to our cooperation. It’s possible that we sustain a loss due to being double-crossed by the other player, even if the reward is greater if both parties choose to cooperate. In situations where the is a degree of asymmetry in the behavioral information and risks of losing is too high, cooperation is not likely.
Tullock shrewdly points out that market transactions differ radically from most Prisoners Dilemma scenarios in one crucial way. In commerce, our partners are chosen and can change at any given time (p.1074). Meaning that not only is trade less static than the typical Prisoners model, but the characteristic of fluidity also alters the rules of the game. If our trading partner is opting to be non-compliant, we can always choose to do business with someone else. Versus being limited to only one partner who may or may not have an adequate incentive to be cooperative. Also, unlike the controlled experimental conditions under which most Prisoner’s dynamics are observed, in commerce the relationships are ongoing (barring death, bankruptcy, or termination of the relationship) (p.1075). Under such conditions maintaining a positive reputation as a trading partner is much more crucial. Engaging in dishonesty or uncooperative behavior could be the death knell of that relationship.
Due to the desire to establish credibility among other firms and potential customers the “… prisoner dilemma vanishes..”(p.1076). If a firm is not cooperating with its customers and suppliers this will impact future interactions. The Masterpiece Cake Shop case is a classic example of this. Yes, the Cake Shop owners were well within their First Amendment rights to not bake a cake for a gay wedding due to religious convictions. However, that does not mean that their decision was a prudent one for the longevity of their enterprise. The bakery received a massive amount of bad press and poor reviews from socially conscious consumers. Resulting in a substantial loss in revenue. Providing the shrewd observer with an allegory conveying the importance of working with your customer base rather than against them. Ultimately, bad press can be the kiss of death for any mom-and-pop establishment.
Consequently, unfettered trade is uniquely insolated from the occurrence of Prisoners Dilemmas due to being able to choose trading partners for extended periods of time. Tullock details a scenario that reflects the typical cartel arrangement among competing firms in a specific industry. If there are five domain firms and one decides not to comply with reducing production there is not much the other participating firms can do (p.1076). Providing some insight into why most price-fixing agreements have a proclivity of failing. There is no safeguard preventing participants from reneging. The inability to choose our partners also explains the issue surrounding international relations. As we cannot choose our “neighboring countries” (p.1077).
Tullock also describes how to trust in business is established. It goes beyond merely providing a superior level of service or a high-quality product. In society, we are judged on a multitude of criteria, even when some of these characteristics do not pertain to the nature of our business. A business person may attend religious services or engage in philanthropy to cultivate the image of being a “safe partner” (p.1077). In the process of establishing one’s self as a “safety partner” what they really are doing is conforming to societal norms. This is precisely what fostering a good reputation entails. Through conforming to societal norms you are presenting yourself as a trustworthy person, who given a Prisoner’s contingency you will be more apt to cooperate (p.1077). Whereas an individual of a more subversive disposition would be more likely to defect. The true irony is that the customer is able to better trust the vendor than the vendor is the customer. Why? The high degree of costs involved in vetting and validating the integrity of the customer (p.1078). Outside of the customer writing a bad check (if anyone still writes checks anyone more) or is caught stealing it is difficult to monitor the myriad of patrons flowing in and out of the store.
Another consideration arises from the observation of the Public Choice pioneer that penned the cited paper. What if a firm or vendor already has a sullied reputation? It is insurmountable difficult to mend a shattered public image. Those with a poor reputation will “rationally respond” by continuing to engage in off-color behavior and practices (p.1079). From a prima facie standpoint, this self-defeating behavior may appear to be anything but rational. However, due to the high costs of repairing a damaged reputation, it is most effective to continue down the path of poor business practices (p.1080). Once trust has been broken it requires a lot of time and effort to win over the hearts and minds of the public.
Considering all of Tullock’s observations, it would appear that Smith’s notion of “the discipline of continuous dealings” is an enduring maxim of economic exchange. If we are accessible to multiple trading partners and are not held hostage by a monopoly, the potential for a Prisoner’s Dilemma dissolves (p.1081). Tullock also notes that with more potential vendors there is “improved” market information (p.1081). Meaning that proprietors will be much more knowledgeable about industry trends and intricacies of the product market. This partially due to having to keep one leg up on the competition. A bigger impetus for this accumulation of market knowledge is observable trends present in daily transactions. Hence why prices serve as the great information bridge between vendors and patrons. It can also be assumed that in a highly competitive market that customers are also savvier in markets where there are many vendors to choose from. As they are too beneficiaries of the follow of market information.