Monday, October 19, 2009
Sunday, October 18, 2009
Penny War and Game Theory
Nash equilibrium, dominant strategy, prisoner’s dilemma. When our Applied Economics class culminated with the famous game theory with some big names such as John Nash (Nobel Prize ‘94) and Robert Aumann (Nobel Prize ‘05), a game happened simultaneously out of classroom. Penny War, an entertaining cross-section competition aiming at fund-raising for social donation, coincidently laid a real battlefield for the game theory.
While there is never short of activities for social responsibility in today’s life of business school, Penny War is again a showcase of students’ creativity. The rule of Penny War is simple. Two or more groups compete to win a fundraising competition. Each group has a bucket to collect penny or notes. This week’s Penny War at Ross started from Monday and ended on Saturday. From Monday to Friday, penny will be counted positive while notes will be counted negative. On last day, i.e. Saturday, all pennies and notes will be count positive. Since we have 6 sections competing, the dynamic is interesting. There are also two main strategies in the Penny War. One is to raise fund as much as possible. The other is to smartly divide raised fund into coins and notes. Dump notes to your nearest competitor if you are leading in the rank. Collusion could be possible. However, given the fact that there are six teams playing, we could easily fall into prisoner’s dilemma.
Or just forget about the game theory. It’s just all about maximizing social welfare. By introducing an auction system, many new revenue created. We saw how a market could create supply and demand and hence funds to be donated. The new value was from candies from Brazil, cookies from Greece, a date with a classmate, and some golf courses. The whole bidding activities culminate to a rap sung in the class in front of the professor. Without such a diversified body of classmate, all this joy and learning would not be exist.