Behavioral Game Theory

Labour's pitch for the upcoming UK general election has been simple - let's talk about the National Health Service. Particularly headline grabbing was the '100 days until the election, 100 days to save the NHS as we know it'  campaign. To focus on the NHS may seem like a simple winning strategy for Labour given the rollercoaster of 'NHS in crisis' stories hitting the news in recent months. But, I think labour strategists may have badly misjudged this one. After years of dodging the issue the British public may finally waking up to the idea that we can only preserve the 'NHS as we know it' with some pretty radical change.        The NHS is a publicly provided health care system that is centrally funded and free at the point of delivery. Labour is broadly committed to maintaining that status quo. They reject private involvement in providing health care. And they reject anything other than a free health service. ' Save our NHS, privatization is putti

The wait is final over to discover who will broadcasting Premier League football from 2016 onwards. There is no surprise this time in the successful bidders - Sky and BT. But there is surprise at the price they have paid - a huge £5.1 billion. That equates to over £10 million per game. This figure is 70% up on last time and above all analyst forecasts. Surely it is time to talk of the winners curse?         The winners curse is the idea that a winner of an auction may well end up losing money. The intuition is simple enough in that the winner of an auction is likely to be the most optimistic as to how much the prize is worth; that optimism may be misplaced. In the past, TV rights have provided some textbook examples of the winners curse. So, do we have another example?         One reason to doubt Sky and BT have overbid is the fact they know pretty well what they are bidding for. The winners curse is most likely to occur when the value of the prize is highly uncertain. But Sky ha

The basic idea behind revealed preference is incredibly simple: we try to infer something useful about a person's preferences by observing the choices they make. The topic, however, confuses many a student and academic alike, particularly when we get on to WARP, SARP and GARP. So, let us see if we can make some sense of it all.           In trying to explain revealed preference I want to draw on a  study  by James Andreoni and John Miller published in Econometrica . They look at people's willingness to share money with another person. Specifically subjects were given questions like:  Q1. Divide 60 tokens: Hold _____ at $1 each and Pass _____ at $1 each.  In this case there were 60 tokens to split and each token was worth $1. So, for example, if they held 40 tokens and passed 20 then they would get $40 and the other person $20. Consider another question: Q2. Divide 40 tokens: Hold _____ at $1 each and Pass ______ at $3 each. In this case each token given to th