Monday, May 3, 2010
You know what they say about prison snich's
Due to the Nash equalibrium, it is always safer and more profitable for companies to break there collusive agreements, or for a couple of prisoners to rat eachother out. Since the outcome of blowing the whislte on your partner in crime is more beneficial to you then not doing so, the nash equalibrium suggests that people would rat each other out. The penalty of not doing so could be very detrimental if your partner rats you out. The main thing that makes the Nash equalibium a tricky thing though, is that it assumes that neither party has any way of knowing for sure what the other party is doing, or will do. Its based on which course of action hurts you the least assuming your partner acts in their own best interests.
When life gives you is lemons, make a junk yard.
I found the concept of lemons (junk used cars) to be an interesting concept. Since its hard for the average buyer to be able to tell the difference between a decent used car (which they would be willing to pay more for) and a lemon ( a piece of crap that might break as soon as they drive off the lot), what tends to happen is for lemons to flood the market. Since buyers cant destinguish between a $10000 quality used car and a $1000 pile of rust, they lower there to say 5k. This goes to undervalue good cars and overvaule bad ones. This creates an incentive for people with junk cars to sell for more then they're worth and for people with good cars not to sell, becasue they wont get the amount that their car is actually worth. Eventually, lemons take over the market and it becomes theoretically impossible to find a good used car.
Subscribe to:
Posts (Atom)