Traveler's Dilemma

What Is the Traveler's Dilemma?

The traveler's dilemma, in game theory, is a non lose situation in which two players endeavor to boost their own payoff, without respect for the other. The game exhibits the "paradox of rationality" — the incongruity that going with choices counter-intuitively or gullibly frequently creates a better payoff in game theory.

Grasping the Traveler's Dilemma

The traveler's dilemma game, figured out in 1994 by economist Kaushik Basu, presents a scenario in which an airline seriously damages indistinguishable collectibles purchased by two distinct travelers. Management will repay them for the loss of the collectibles, yet since they have no clue about their value, they advise the two travelers to separately record their estimate of the value as any number somewhere in the range of $2 and $100 without consulting with each other.

Notwithstanding, there are two or three provisos:

1. Assuming the two travelers record similar number, they will be repaid that amount.
2. Assuming they compose various numbers, management will accept that the lower price is the real value and that the person with the higher number is cheating. While they will pay the two of them the lower figure, the person with the lower number will get a $2 bonus for honesty, while the person who composed the higher number will get a $2 penalty.

The rational decision, in terms of the Nash equilibrium, is $2. The thinking goes as follows.

• Traveler A's most memorable impulse might be to record $100 and in the event that Traveler B likewise records $100, that is the amount both will receive from the airline management.
• In any case, in the event that Traveler A puts down $99 and in the event that Traveler B puts down $100, A would receive $101 ($99 + $2 bonus).
• In any case, An accepts that this thought process will likewise happen to B, and assuming B likewise puts down $99, both would receive $99. So A would truly be better disconcerting down $98, and getting $100 ($98 + $2 bonus) on the off chance that B composes $99.
• However, since this equivalent idea of composing $98 could happen to B, A considers putting down $97, etc.
• This line of backward induction will take the travelers right down to the littlest permissible number, which is $2.

Picking Nash Equilibrium

In experimental studies, in spite of the expectations of game theory, the vast majority pick $100 or a number close to it, either without thoroughly considering the problem or while completely aware they are straying from the rational decision. Thus, while the vast majority naturally feel that they would choose a lot higher number than $2, this instinct appears to go against the coherent outcome anticipated by game theory — that every traveler would choose $2. By dismissing the legitimate decision and acting irrationally by composing a higher number, individuals wind up getting a substantially greater payoff.

These outcomes concur with comparative studies utilizing different games like the [Prisoner's Dilemma](/detainees dilemma) and the Public Goods game, where experimental subjects tend not to pick the Nash equilibrium. In light of these studies, scientists have suggested that individuals seem to have a natural, positive demeanor for cooperation. This disposition prompts cooperative equilibria that give higher payoffs to all players in single-shot or rehashed games and can be made sense of by particular evolutionary tensions that favor these sorts of apparently irrational however beneficial strategies.

In any case, traveler's dilemma studies have likewise shown that when the penalty/bonus is bigger or when the players comprise of groups of several individuals who go with a common choice, then, at that point, the players all the more frequently decide to follow the rational strategy that prompts the Nash equilibrium. These effects additionally associate, in that groups of players pick the more rational strategy as well as even more receptive to the size of the penalty/bonus than individual players.

These studies propose that advanced strategies that will generally make beneficial social outcomes can be offset by additional rational strategies that incline toward the Nash equilibrium relying upon the structure of the incentives and the presence of social divisions.

Features

• The Traveler's dilemma is a game where two players each bid on a proposed payoff and both receive the lower bid, plus or minus a bonus payoff.
• As per game theory, the rational strategy for the two players is to pick the most minimal conceivable payoff which brings about the two players getting lower payoffs than they could accomplish by following an irrational strategy.
• In experimental studies, individuals reliably picked higher payoffs and accomplished better outcomes than the rational strategy anticipated by game theory.