Behavioral Game Theory

The UKs National Institute of Health and Care Excellence has a basic remit of evaluating the costs and benefits of medical treatment. Last week, it emerged that NICE will change its guidelines so that more people with Type 2 diabetes will have access to gastric bypass surgery. I think it is fair to say that the reaction to this news was not particularly positive. So, has NICE got its sums wrong?        Evaluating the costs and benefits of medical treatment is always going to be a controversial and thankless task. Just about any decision is likely to upset someone. For instance, telling a cancer patient that her treatment is not 'cost effective' is clearly not going to be popular. But, from the other side, saying that gastric bypass surgery is 'cost effective' did not go down well with taxpayers. So, keeping everyone happy is impossible. That does not mean, however, there are not right and wrong ways to measure costs and benefits. And, there seems to be an increas

We were recently passing Stonehenge and so stopped off to see what the new visitor's center was like. Given that we are members of English Heritage it was free for us to visit. Most visitors, though, were stumping up the standard entry fee of £13.90. And, to put it bluntly, £13.90 seemed like a bit of a rip-off.          Why a rip-off? Stonehenge is a truly remarkable site. It is arguably best seen, however, from the many paths in the surrounding countryside - and these are completely free for anyone to walk. The entry ticket only gets you a 'little bit closer' to the stones. And I'm not sure that's worth £13.90. To put things in context I would make the comparison with Dover Castle (another English Heritage site). Dover Castle is more expensive at £19.30 but you get a whole lot more for your money - castle, wartime tunnels, museums, sea views etc. I would guess the average visitor to Stonehenge probably spends around 30 minutes at the stones while the average vi

The Lochaber Mountain Rescue team in Scotland recently had to rescue someone who fell after setting off up one of Scotland's highest mountains in flip-flops. This looks like a textbook example of moral hazard. Moral hazard arises whenever someone (the principal) 'employs' someone else (the agent) to do a job and the agent takes 'more risk' than the principal would like. In this case mountain rescue essentially 'employs' people to not be dumb in the mountains, but too many of us are dumb in the mountains.           But, here's an interesting issue: In the textbook story of moral hazard the agent takes proper account of incentives. So, a person takes greater risk in the mountains because he knows  that mountain rescue will save him. On this account, scrapping mountain rescue might negate the need for mountain rescue.          I would be surprised, however, if the three men involved in this story knew a great deal about Lochaber Mountain Rescue. Inste