Covid-19 Consumer's Dilemma
23 March 2020
Most of you will be aware of the classic theoretical game ‘the Prisoner’s Dilemma’, under which situation game theory analysis looks to explain why two assumed rational individuals may choose not to cooperate even when cooperation appears to be in their combined best interests.
By way of reminder, the setting of the game is that two members of a criminal gang (say Bonnie and Clyde) are arrested and imprisoned. Each prisoner is confined and isolated from the other. Prosecutors lack adequate evidence to convict the pair on a more serious charge, but they have enough to convict both on a lesser charge. Each prisoner is offered the opportunity to betray the other by testifying that the other committed the crime, or to cooperate with the other by staying silent. The possible outcomes are:
- If Bonnie and Clyde betray each other they will both serve two years in prison;
- If Bonnie betrays Clyde but Clyde remains silent, Bonnie will go free and Clyde will serve three years in prison (and vice versa);
- If Bonnie and Clyde both stay silent, both will be convicted on the lesser charge and serve one year in prison.
Game theory analysis suggest that, simplistically, as betraying a partner offers a greater reward than cooperating with them, all purely rational self-interested prisoners will betray the other, meaning the only possible outcome for two such prisoners is that they will betray each other.
Recently, we have been bombarded each day by videos, clips and other postings of seemingly ‘ordinary’ masses, storming shops in order to stack their trolleys with toilet rolls and other goods due to the Covid-19 virus. Naturally, rational self-interest thoughts enter our heads as to whether we should be doing the same. Do we take one packet of rolls and allow others to take one each, or do we risk the next person taking them all as we could have done?
In these and similar concept situations, such as the Tragedy of the Commons shared-resource system, reality studies have demonstrated that humans do in fact display a systemic bias toward cooperative behaviour, despite what is predicted by simple models of ‘rational’ self-interest action. Thankfully, reality generally reflects greater trust among people (including strangers) that others will do the right thing and will tend to work toward the best common outcome.
While these reality studies should give some us reassurance under the present Covid-19 conditions, as a result of the bulk-buying activities of certain people, various governments and retail stores across the globe have felt the need to implement, or are presently contemplating, multiple purchase restrictions.
Although the Prisoner’s Dilemma situation is not a perfect analogy to current consumer decisions and activities, most obviously the outcome matrix is not merely limited to the decisions of two prisoners, instead it will be the decisions and actions of most of the population which will determine our ultimate shared outcome. Due to the huge number of parties involved, clearly one bulk-buying ‘betrayal’ by a single individual, while others remain composed, will not cause increased hardship to all others (akin to Clyde in Outcome 2.). However, the greater the number of self-interested people choosing to ‘betray’ others through bulk-buying or stockpiling, then the more the likelihood is that a ‘Tipping Point’ will be reached (as explained under many different scenarios by Malcolm Gladwell in his book of the same name). At this point the constrained ‘others’ will revert to simple model rational self-interest as the preferred decision process and clamber to stockpile, for fear of being the ‘last in line’ for what may then have become scarce resources.
If we all ‘betray’, bulk-buy and hoard, then we will quickly find ourselves in the Outcome 1 position and we will collectively suffer relatively greater hardship due to the complete loss of certain supply items (at least for a sustained period), the panic escalation that will inevitably come with it, and the further widening of the spectrum of goods being stockpiled by people.
Of course, Outcome 3 is the position that we need to collectively accept and aim for. A little hardship undertaken by all will result in the best common outcome for all. So, when we watch these Charmin’ toilet roll scenes (sorry, I couldn’t help myself), we should put some faith in the reality studies, remain trustful in each other, and realise that it is the actions of the purely self-interested minority that are causing the concerns and restrictive measures which are being imposed. These hoarders do not represent the ordinary people or the common interest-based mindset of the majority. We are all ‘prisoners’ in the current Covid-19 crisis so we must all avoid pushing toward the Tipping Point. , You are not the last in line.
So the simple message is…
KEEP CALM AND CARRY ON (AND WASH YOUR HANDS).