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Showing posts with the label prisoner's dilemma

Mathematics, Tharoorisms and Prisoner's Dilemma

- October 26, 2020

A few days before, came across an interesting tweet. This tweet is available here . The tweet links to an article that talks about jargons and their usage in everyday life. The author in the article points out that research indicates, the use of jargons at every second instant reflects a case of insecurity and not academic learning or competence. Therefore, one would wonder, why people resort to jargons and high sounding words at the drop of the hat. Of course, people like Shashi Tharoor or Manish Tiwari seemed to master that. Therefore, it would be pertinent to decode the logic behind using Tharoorisms so as to speak in the everyday life. If one goes further, there is a tendency among the social scientists to increasingly resort to mathematical formalism of late. Interestingly, the mathematical formalism only makes the concept more complex than demystifying it. Unless the goal is to make the concepts or language complex, there seems to be no reason why one should use it. Yet peopl

Economics and Signalling: Beauty and Ownership of Durables

- October 25, 2020

There is without doubt a fascination in many to look or appear beautiful or handsome. They want to score one up over their family members or friends or those in the social circle. There is no doubt an attraction towards spending on beauty products like cosmetics or dresses. There is further an attraction towards owning latest electronic gadgets, a keen inclination to own a car or at least a two wheeler, an innate desire to own house preferably in an upmarket belt, a tendency to possess and wear jewellery different from the rest. All these are instances which one observes around them in everyday life. To some it might be a necessity, to some it might be an aspiration, to others it might be fulfilment of desire to square up with their prospective rivals so as to speak. Yet in each of these actions or movements towards those actions, underlies a concept that is innate to economics. While as perceived from outside, economics might appear abstract, but as the explanation for these phenome

Jan Bhagidaari, Signalling and Bottom of Pyramid Entrepreneurial Creation

- October 19, 2020

In the presence of information asymmetry, it is difficult to gauge the intentions of the opposing party. The only way to detect any possible moves is through a careful observations of the signals they are likely to send. Thus signalling is of critical import in economics. In the past posts, the role of signalling has been discussed in certain contexts. The current post would seek to take it forward. Recently there was a communication from the RBI Governor to the players in the debt market be competitive and not combative to achieve the best results. There is a tendency in the section of debt players to act pro-cyclically in tune with RBI whereas the others might act counter-cyclically to the RBI stance. This often negates the RBI purpose and thus monetary transmission might not achieve the desired results. This of course in some ways reflects the tragedy of commons often discussed in economics literature but owes its origin to biology. Yet in discussion on signalling, two dimen

Monopolistic Competition and Barriers to Entry: Some Notes

- September 11, 2020

Economic theory advocates competition for social welfare. As the completive intensity increases, there is an increasing rush to reduce prices. Firms reduce price till such a point of time wherein their marginal costs are equated to the prices. In a perfect competition, the firms have control over the output but have no control on the price. They are price takers, in other words, prices are determined by the market. This is so because of the homogeneity of the product thus negating the possibility of differentiation. Furthermore, in perfectly competitive world, the barriers of entry are nil. If there arises the existence of supernormal profit, other prospective suppliers are attracted by this possibility thus planning their entry into the market. As new players enter into the market, the output increases. Implied is an increase in the goods being offered for sale relative to the demand for goods. The imbalances thus created in supply and demand make firms reduce price which will proce

The Stock Analyst's Dilemma

- May 10, 2020

Robert Frank discusses an attention-grabbing question in his presentation of different assignments he posts to the students. As one peruses the reports of various stock recommendations by analysts, invariably they point out to a ‘Buy’ recommendation. Alternatively, sometimes they might recommend a ‘Hold’ position but rarely do they suggest a ‘Sell’ recommendation. He seeks to identify the reasons behind this behaviour. All stocks do not behave in the same manner since they are linked to their firm performance which is uneven. Hence the stock prices would move a different trajectory for each firm and thus to a stock investor or somebody holding the stock in his or her portfolio, the decision cannot be the same. A genuine analyst would go into the intricacies of the fundamentals and technical of the stock and base his or recommendations on these foundations. A uniform recommendation in most cases defies the natural order. It suggests a signal of some sort of manipulation. To an ana

Urdu and Anti-Establishmentarians: Dominant Strategy?

- January 06, 2020

Anti-establishmentarian rhetoric in India habitually conjures Urdu imagery and artistry. The same can be conceivably ascribed to the fact the rhetoric is an amalgamation of Islamic revivalism in attempts to reclaim its socio-political veto, Marxism ceaselessly in quest of a villain (Modi-Shah as new bourgeoisie) subduing the proletariat (Islam) and Nehruvian posterities unable to come to terms with the loss of power and privileges associated thereof and amplified by the Indian media cacophony. As I cited in Why Elitism Flourishes? http://stalkingtheory.blogspot.com/2019/12/why-elitism-flourishes.html , clubs once formed are protectionist but barriers to entry are formidable with connections not merit defining the benchmarks for admission. Foot soldiers desire to enter upper layers of the elite pyramid and therefore thus a need on their part to demonstrate their eligibility. Implied is using certain signals in conveying their utility to the apex. The competition however is harsh

Blockbuster Populism

- November 11, 2013

Often we see populist policies getting all round support from political parties. There are number of instances wherein pieces of legislation perceived to be good economics get defeated or withdrawn. Is it merely perception of something else at work. I've my own take on this. We need to understand this apparent paradox through Game Theory and Prisoner's Dilemma. More on this here

Prisoners Dilemma and Retail Promotions

- June 11, 2012

It is not unusual to get 1 kg onion free for purchases above say Rs. 250/- or half kg sugar free for purchases above say Rs. 300/- in leading retail outlets. Does this attract consumer loyalty. A study sometime back along with my students revealed certain interesting dimensions. The presentation is found here . I will delve into certain dimension here. Promotions are key element in this process and higher promotional elasticity will be driven by the increased ambiance as an output coupled with reduction in psychic costs. Researchers and strategists can use utility models to study consumer behavior and the reasons for their preference towards particular stores. In the increased emphasis on promotions, an interesting fact to note that customers continue to be loyal to firms like Nilgiris and Namdharis which are very low on promotions. At least in the initial phases, customer loyalty could not be generated in major food retailers despite excessive emphasis on promotions as the f

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