Coffeecon Talk (S3 Ep 4)
Anasuya Avadhanam FY BSc
Gaargi Jamkar SY BSc
Megha Kajale SYBSc
Sharvari Talwalkar SY BSc
COFFEECONTALK is a video series which is posted on the GIPE’s undergrad Youtube Channel on the last day of every month. It falls under the Econcordia section of the institute’s 8:10 newsletter which revolves around Economics, Business and Finance
The game: whoever sends the most money to the host will win the whole amount. Players do not know how much their opponent is paying. If the same money is paid then the host wins. This game is a zero sum game: Games where one player’s gain is exactly balanced by another player’s loss.
Game theory is the science of strategy. It attempts to determine mathematically and logically the actions that “players” should take to secure the best outcomes for themselves in a wide array of “games.” The games it studies range from chess to child rearing and from tennis to takeovers.
So what are the factors that could affect one’s gamble or a calculated move?
- Budget
- Risk nature – averse, neutral, loving
- Expectation about the other person’s risk nature.
So let’s do this game in 3 levels
- 2 friends – assuming they know each other’s risk nature
- 2 strangers – they do not know each other’s risk nature
- 2 groups – each group with 3 people – to increase the budget
| Loving | Neutral | Averse | |
| Loving | Both losers? | B | B |
| Neutral | A | Both losers? | B |
| Averse | A | A | Both losers? |
Would you prefer to play this game with someone with the same risk appetite as yours?
You might think that’s fair but in reality, you just have more chances of gpaying the same amount. You’re better off playing with someone with a lower risk appetite than yours.