Barry Nalebuff on Punishments, Relationships and Game Theory
Barry Nalebuff is the Milton Steinbach Professor of Management at the Yale School of Management. Professor Nalebuff has written on a wide variety of subjects ranging from strategy to pricing, bidding to bargaining, and innovation to incentives. He is an expert on game theory and has written extensively on its application for managers. His most recent book, The Art of Strategy, is an update of the best-selling Thinking Strategically, which explains the fundamentals of game theory using real world examples.
Professor Nalebuff's work on strategy focuses on the fundamental duality in business—the conflict between cooperating to create a pie and competing to divide it up—which he presents in Co-opetition. His book, Why Not?, focuses on providing a framework for problem solving and ingenuity. His work on product bundling was featured in the European Union's investigation of the proposed GE-Honeywell merger.
Question: Can game theory be applied daily human interactions?
Barry Nalebuff: One challenge for people is figuring out, is this relationship going anywhere? And I think the following example will nicely illustrate the strategic thinking that goes into this.
So my friend was dating this fellow who had gotten divorced, and they are living together, they were in love, they were happy. And he kept on saying that they get married, but it had been kind of a while. Could they buy a house together? Could they live in together?
They had a daughter from the previous marriage and she wasn’t really quite ready to see dad make the step. And the question was, how could she feel comfortable that they were really going to go somewhere and yet somehow not make this public? And what she came up with was the following idea that he needs to get a tattoo. It could be a discreet tattoo with her name. And if he was willing to do that, she was willing to stay with him.
And when he wasn’t, she realized that he was, I guess, the classic Peter Pan in this regard. And this illustrates the point of signaling. Signaling is taking an action which is really convincing other people, and perhaps yourself, that what you are saying is true.
So getting a tattoo is, relatively speaking, inexpensive, if you are planning to spend the rest of your life with this person. But it isn’t so inexpensive if you have other plans.
And we are always trying to go and send credible signals to other people because talk is cheap.
Another example; my own sort of theory; it’s important. Why do many women go to business school? It’s pretty expensive. It takes two years of your life. But many employers are worried that women are going to leave the career to go and have children, start a family.
And you ask the person you interview -- well, one that might be illegal to ask them -- but even if you did, they are all the same, "No, no, I’m here for the career."
On the other hand, if the person says, "I just spent $70,000 in tuition, two years of my life getting this training. I wouldn’t have done that unless I was intending to pay it back. And so the fact that I went and did this activity should be great evidence to you that I am serious about my career."
Other people will say it, I’ve taken an action which is really of that category and then the little one and this is the Hermes tie, right? I mean, why spend/waste so much money on this tie? Well because I’m going to be the person who ultimately has the job that means I’ll be wearing this thing, and it was actually going to pay it back.
Somebody else can say, oh, they are going to have this, but I’ve already proven that it’s worth my while to do this.
Question: How can game theory be applied to relationships?
Barry Nalebuff: Well, appreciating that many contracts are subject to renegotiation, and so one when you have a kid, there’s a question of who’s going to get up in the middle of the night. And then part of the problem is that, if it turns out initially it’s only the mother, then the kid only responds to the mother. And so then the father said, look, I’m just no use here.
And so understanding this is a repeated game, it turns out that unless you get the dad involved early on, the dad could make then credible that he is not involved.
This is, again, an example of looking forward, and reason backward, and understanding how it will play out.
Kids, of course, are the most natural strategists because, one, they don’t care if they are up at two in the morning; what else have they got have to do? They are bored.
Or the high school kids who want the car and you’ve got friends over, your boss over, and just thinking about making a scene then, and you don’t want that to happen, they understand that.
But the great one is the question of punishment. How do you make punishments credible? Because, you know that you don’t really want to punish the kid, it’s not your interest, and you don’t like doing that, and they know that and they are trying to take advantage of it.
So I’ll give you two fun or amusing examples of this. When one kid misbehaves, you punish the other one for it. So the kid will say that’s totally unfair, but that kid will be sure to punish the one who misbehaved. So, Tommy, if you misbehave, I am going to punish your older brother. You know that Tommy fears his older brother much more than he ever fears anything you do, and so that will be one way of doing it.
I’ll give you an example in terms of weight loss. Two of my colleagues want to lose weight and so they bet each other $5,000 that they will get down to some weight level and that they will stay below it. Now it worked, and then after about 6 months, one of them starts creeping up a little bit. And his friend called him on the bet and took the $5,000 from him which really, really got her friend mad. In fact, may even have broken their friendship.
And when I asked what was going on? Why do you do this? And he said, well, I wanted to be sure that if I went up in my weight, he would call me, and I was afraid that if I let him off, well, then he’d let me off. But I can tell you this now, that if I go above my proposed weight, I know that he is going to call me on it because he is so mad at me for having called him. And that way of making that enforcement credible has kept my friend actually at the weight he wants.
And turning that back to kids, well, I punished the kid not because I want to, but because if I don’t, he or she will punish me for not punishing them, and so that is the type of argument you make.
Recorded on: Oct 2, 2008
Yale's Barry Nalebuff discusses game theory's myriad applications.
A new method promises to capture an elusive dark world particle.
- Scientists working on the Large Hadron Collider (LHC) devised a method for trapping dark matter particles.
- Dark matter is estimated to take up 26.8% of all matter in the Universe.
- The researchers will be able to try their approach in 2021, when the LHC goes back online.
Researchers hope the technology will further our understanding of the brain, but lawmakers may not be ready for the ethical challenges.
- Researchers at the Yale School of Medicine successfully restored some functions to pig brains that had been dead for hours.
- They hope the technology will advance our understanding of the brain, potentially developing new treatments for debilitating diseases and disorders.
- The research raises many ethical questions and puts to the test our current understanding of death.
The image of an undead brain coming back to live again is the stuff of science fiction. Not just any science fiction, specifically B-grade sci fi. What instantly springs to mind is the black-and-white horrors of films like Fiend Without a Face. Bad acting. Plastic monstrosities. Visible strings. And a spinal cord that, for some reason, is also a tentacle?
But like any good science fiction, it's only a matter of time before some manner of it seeps into our reality. This week's Nature published the findings of researchers who managed to restore function to pigs' brains that were clinically dead. At least, what we once thought of as dead.
What's dead may never die, it seems
The researchers did not hail from House Greyjoy — "What is dead may never die" — but came largely from the Yale School of Medicine. They connected 32 pig brains to a system called BrainEx. BrainEx is an artificial perfusion system — that is, a system that takes over the functions normally regulated by the organ. The pigs had been killed four hours earlier at a U.S. Department of Agriculture slaughterhouse; their brains completely removed from the skulls.
BrainEx pumped an experiment solution into the brain that essentially mimic blood flow. It brought oxygen and nutrients to the tissues, giving brain cells the resources to begin many normal functions. The cells began consuming and metabolizing sugars. The brains' immune systems kicked in. Neuron samples could carry an electrical signal. Some brain cells even responded to drugs.
The researchers have managed to keep some brains alive for up to 36 hours, and currently do not know if BrainEx can have sustained the brains longer. "It is conceivable we are just preventing the inevitable, and the brain won't be able to recover," said Nenad Sestan, Yale neuroscientist and the lead researcher.
As a control, other brains received either a fake solution or no solution at all. None revived brain activity and deteriorated as normal.
The researchers hope the technology can enhance our ability to study the brain and its cellular functions. One of the main avenues of such studies would be brain disorders and diseases. This could point the way to developing new of treatments for the likes of brain injuries, Alzheimer's, Huntington's, and neurodegenerative conditions.
"This is an extraordinary and very promising breakthrough for neuroscience. It immediately offers a much better model for studying the human brain, which is extraordinarily important, given the vast amount of human suffering from diseases of the mind [and] brain," Nita Farahany, the bioethicists at the Duke University School of Law who wrote the study's commentary, told National Geographic.
An ethical gray matter
Before anyone gets an Island of Dr. Moreau vibe, it's worth noting that the brains did not approach neural activity anywhere near consciousness.
The BrainEx solution contained chemicals that prevented neurons from firing. To be extra cautious, the researchers also monitored the brains for any such activity and were prepared to administer an anesthetic should they have seen signs of consciousness.
Even so, the research signals a massive debate to come regarding medical ethics and our definition of death.
Most countries define death, clinically speaking, as the irreversible loss of brain or circulatory function. This definition was already at odds with some folk- and value-centric understandings, but where do we go if it becomes possible to reverse clinical death with artificial perfusion?
"This is wild," Jonathan Moreno, a bioethicist at the University of Pennsylvania, told the New York Times. "If ever there was an issue that merited big public deliberation on the ethics of science and medicine, this is one."
One possible consequence involves organ donations. Some European countries require emergency responders to use a process that preserves organs when they cannot resuscitate a person. They continue to pump blood throughout the body, but use a "thoracic aortic occlusion balloon" to prevent that blood from reaching the brain.
The system is already controversial because it raises concerns about what caused the patient's death. But what happens when brain death becomes readily reversible? Stuart Younger, a bioethicist at Case Western Reserve University, told Nature that if BrainEx were to become widely available, it could shrink the pool of eligible donors.
"There's a potential conflict here between the interests of potential donors — who might not even be donors — and people who are waiting for organs," he said.
It will be a while before such experiments go anywhere near human subjects. A more immediate ethical question relates to how such experiments harm animal subjects.
Ethical review boards evaluate research protocols and can reject any that causes undue pain, suffering, or distress. Since dead animals feel no pain, suffer no trauma, they are typically approved as subjects. But how do such boards make a judgement regarding the suffering of a "cellularly active" brain? The distress of a partially alive brain?
The dilemma is unprecedented.
Setting new boundaries
Another science fiction story that comes to mind when discussing this story is, of course, Frankenstein. As Farahany told National Geographic: "It is definitely has [sic] a good science-fiction element to it, and it is restoring cellular function where we previously thought impossible. But to have Frankenstein, you need some degree of consciousness, some 'there' there. [The researchers] did not recover any form of consciousness in this study, and it is still unclear if we ever could. But we are one step closer to that possibility."
She's right. The researchers undertook their research for the betterment of humanity, and we may one day reap some unimaginable medical benefits from it. The ethical questions, however, remain as unsettling as the stories they remind us of.
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