Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Tuesday, May 17, 2005

GameTheory or Child's Play?
Rock, Paper, Scissors

We used to play "Rock, paper, scissors" often as youngsters. Whoever won got to punch or slap the loser(s) on the inner forearm. We would play for hours, and soon we could pick up tendencies of the other players, adjust our own, and adjust to their adjustments to our adjustments to... etc. In the end, we all had very red forearms and a sense of passage into manhood.

In the game, rocks break scissors, scissors cut paper, and paper covers rocks. There is no dominant strategy; but does that make it a perfect game of chance for determining who should receive a contract? [h/t to BrianF]

The Maspro Denkoh electronics corporation was selling its $20 million collection of Picassos and Van Goghs, but the director could not decide whether Sotheby's or Christie's should have the privilege of auctioning them.

So he announced that the deal would go to the winner of a single round of scissors, paper, stone - the children's game that relies on quick fire hand gestures, where stone beats scissors, scissors beat paper, and paper beats stone.

Sotheby's reluctantly accepted this as a 50/50 game of chance, but Christie's asked the experts...
No, they didn't hire McAfee and McMillan or other game-theory notables. They turned to

... Flora and Alice, 11-year-old daughters of the company's director of Impressionist and modern art, and aficionados of the game.

They explained their strategy:
1. Stone is the one that "feels" the strongest
2. Therefore a novice will expect their opponent to go for stone, and will go for paper to beat stone
3. Therefore go for scissors first

Sure enough, the novices at Sotheby's went for paper, and Christie's scissors got them an enormously lucrative cut.

I think that outcome was luck.

In our own versions of the game, the novice strategy worked, more often than not, but for different reasons. We had to bring our fists down three times, and, on the third, keep the fist for a rock, hold our hand flat for paper, or extend two fingers for scissors. I soon learned that most people had an inertia or indecision or something that kept their hands in the shape of fists more often than not, so I won more often playing paper ... ... until they caught on.
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