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How to Buy a Car . . . Using Game Theory!
Bruce Bueno de Mesquita, author of The Predictioneer's Game, shares his foolproof method for getting your next car for the lowest price possible.
What's the Big Idea?
If you're not a mathematician, game theory can seem daunting and abstract. Simply defined, it is a mathematical approach to modeling situations in which there are a limited number of rational decision makers. Depending on the complexity of the situation and the number of players, the math can get pretty complicated. To complicate things further, there's an ongoing debate raging about game theory's applicability to real world situations in which, behavioral economists like Daniel Kahneman argue, people often behave irrationally.
In spite of these complexities, and although he fully admits the limitations of game theory, Bruce Bueno de Mesquita, author of The Predictioneer's Game and The Dictator's Handbook, has had great success in applying it to everything from predicting whether or not Iran would acquire nuclear weapons to buying a car for $6000 less than one would expect to pay. Here, he explains how to avoid sticker shock by never setting foot in a dealership until you've agreed on a final price:
What's the Significance?
De Mesquita argues that people always behave out of self-interest. In the car-buying game, the dealers want you to buy the car from them and nobody else. If threatened in the manner de Mesquita describes, they're left with two choices: either give you the lowest price they possibly can or assume you're bluffing – that you won't call anybody else. The latter choice is foolishly risky and an unlikely one for the dealer to make. But in either case, if you've cast your net wide enough, you're covered.
The broader significance here is that the application of simple logical principles to everyday decision making can yield far better results in most cases than relying on emotion or intuition. The "bond of trust" that good salespeople rely upon in face-to-face transactions is obviously an illusion, but it works (when it does) because of our socio-emotional wiring. We want to trust people. We want to believe they have our best interests, not their own, at heart.
Readers – what other applications can you see (or have you successfully used) for applying game theory or logic to the kinds of decisions we often make emotionally or impulsively?
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Sallie Krawcheck and Bob Kulhan will be talking money, jobs, and how the pandemic will disproportionally affect women's finances.
Got $55 million lying around? If so, you might be able to score a spot aboard the International Space Station starting 2024.
- NASA awarded a contract to startup Axiom Space to attach a "habitable commercial module" to the International Space Station.
- The project will also include a research and manufacturing module.
- The move is a major step in NASA's years-long push to privatize.
Image: Axiom Space<p>But first, space-tourist-hopefuls would have to pass through physical and medical exams, and 15 weeks of expert training. After that, the trip sounds pretty comfy:</p><p>"There will be wifi," Suffredini <a href="https://www.nytimes.com/2018/06/09/style/axiom-space-travel.html" target="_blank">told the New York Times</a> last year. "Everybody will be online. They can make phone calls, sleep, look out the window. [...] The few folks that have gone to orbit as tourists, it wasn't really a luxurious experience, it was kind of like camping. [...] Pretty soon we're going to be flying a butler with every crew."</p>
A render of the ISS tourist experience.
Image: Axiom Space<p>In a blog post, NASA wrote:</p><p>"Developing commercial destinations in low-Earth orbit is one of <a href="https://www.nasa.gov/press-release/nasa-opens-international-space-station-to-new-commercial-opportunities-private" target="_blank">five elements</a> of NASA's plan to open the International Space Station to new commercial and marketing opportunities. The other elements of the five-point plan include efforts to make station and crew resources available for commercial use through a new commercial use and pricing policy; enable private astronaut missions to the station; seek out and pursue opportunities to stimulate long-term, sustainable demand for these services; and quantify NASA's long-term demand for activities in low-Earth orbit."</p>
NASA's push to privatize the ISS<p>When a Russian rocket launched the first module of the ISS into space in 1998, NASA expected the space station to operate for about 15 years. But the agency has extended the life of the ISS twice, with funding currently set to expire in 2024. NASA spends between $3 and $4 billion per year operating and shuttling astronauts to and from the station. That's a decent chunk of the agency's $22.6 annual budget. What's more, the "major structural elements" of the ISS are certified only through 2028.</p><p>Meanwhile, NASA has been eyeing other projects, namely: putting humans back on the moon in 2024 and establishing a lunar presence. So, to save and redirect money, the agency has been starting to hand over the aging space station to the private sector, which could use it for commercial research and space tourism.</p><p>But some have questioned the move to privatize the ISS, including NASA's own inspector general, Paul K. Martin.</p><p>"An obvious alternative to privatization is to extend current ISS operations," Martin wrote in a <a href="https://oig.nasa.gov/docs/CT-18-001.pdf" target="_blank">2018 report</a>. "An extension to 2028 or beyond would enable NASA to continue critical on-orbit research into human health risks and to demonstrate the technologies that will be required for future missions to the Moon or Mars."</p>
Image: Axiom Space<p>Martin noted that "research into 2 other human health risks and 17 additional technology gaps is not scheduled to be completed until sometime in 2024," meaning that any slip-ups in the process would mean such research might go uncompleted. He also wrote that it's "questionable" whether the private sector could turn a profit on the ISS without "significant" government funding. The Institute for Defense Analyses, a federally funded research and development center, <a href="https://docs.house.gov/meetings/SY/SY00/20180517/108302/HHRG-115-SY00-Wstate-LalB-20180517.pdf" target="_blank">also found</a> that it "is unlikely that a commercially owned and operated space station will be economically viable by 2025."</p><p>The implication is that, if the ISS is handed over to the private sector, taxpayers could end up indirectly supporting space tourism for the ultra-rich. Whether that's worth any of the research benefits that might come from the ISS post-2024 is anybody's guess.</p><p>As the ISS enters its final years, China <a href="http://www.xinhuanet.com/english/2019-10/17/c_138479514.htm" target="_blank">plans</a> to complete construction of a manned space station in 2022.</p>
The coronavirus pandemic has brought out the perception of selfishness among many.
- Selfish behavior has been analyzed by philosophers and psychologists for centuries.
- New research shows people may be wired for altruistic behavior and get more benefits from it.
- Crisis times tend to increase self-centered acts.
Paul Krugman on the Virtues of Selfishness<div class="rm-shortcode" data-media_id="7ZtAkm6C" data-player_id="FvQKszTI" data-rm-shortcode-id="828936bf6953080e9018307354c0c02b"> <div id="botr_7ZtAkm6C_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/7ZtAkm6C-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/7ZtAkm6C-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/7ZtAkm6C-FvQKszTI.js"></script> </div> The Nobel Prize-winning economist on the virtues of selfishness.
Evolution Is Moving Us Away from Selfishness. But Where Is It Taking ...<div class="rm-shortcode" data-media_id="cyeqmYCb" data-player_id="FvQKszTI" data-rm-shortcode-id="6c5efecb56456e9acc25cf36935b1826"> <div id="botr_cyeqmYCb_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/cyeqmYCb-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/cyeqmYCb-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/cyeqmYCb-FvQKszTI.js"></script> </div>
Exploring Morality and Selfishness in Modern Times<div class="rm-shortcode" data-media_id="02eX1Cag" data-player_id="FvQKszTI" data-rm-shortcode-id="45cc6180db791f32683988fb52faff26"> <div id="botr_02eX1Cag_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/02eX1Cag-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/02eX1Cag-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/02eX1Cag-FvQKszTI.js"></script> </div> Philosopher Peter Singer discusses the state of global ethics.
Parenting could be a distraction from what mattered most to him: his writing.
Ernest Hemingway was affectionately called “Papa," but what kind of dad was he?