----- Original Message -----
From: "Eric M. McDaniel" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Wednesday, February 20, 2002 12:56 PM
Subject: Re: Economics of rank vs. Economics of the most money
> Has anyone read the article summarized in The Economist ("Are People
Willing
> to Pay to Reduce Others' Incomes?", in the February issue of Annales
> d'Economie et de Statistique)?
>
> Based strictly on the text of The Economist's article, it seems that the
> players were in fact attempting to maximize their income. There was a
fixed
> supply of money involved in the game, which was initially divided equally
> among the four players. Players could each pay to reduce the money of
other
> players. But it only cost each player between 2 and 25 cents to reduce
> another player's money by one dollar!!! Since the amount of money in the
> "economy" here was fixed, paying 2 to 25 cents to reduce another person's
> wealth by one dollar sounds like a pretty good investment decision to me,
in
> effect raising one's own wealth by between 75 and 98 cents. Is this
right?
There's something wrong with your math.
Assuming that:
* there are exactly 2 players
* each players have $50 at some time t0
* it costs Player1 2 cents to reduce Player2's wealth by $1
Let the state of the game be defined by ((Absolute wealth of Player1,
Absolute wealth of Player2), (Relative wealth of Player1, Relative wealth of
Player2 ))
So at t0, the state of the game is (($50, $50), (50%, 50%))
After the predatory move, this state of the game is about (($49.98, $49.00),
(50.49%, 49.51%)).
So, yes, if the goal is to maximize relative wealth, the predator is being
rational, especially if the total wealth of the game is small.
Gustavo
http://www.optimizelife.com
