Saturday, November 28, 2009

Even when you win, you lose....

Who knew that in an article about a new auction site where bidders pay to bid I would find a truth about love that saves me having to read years of Cosmo articles and stacks of self-help books such as He's Just Not That Into You, but there it is! Clearly, I need to read more about game theory and economics.

The author, Richard H. Thaler explains the motivations driving players to stay in the game even when they know they have either gone way past losing or that a win is not really a gain:

The dollar auction game was invented by a pioneer of game theory, Martin Shubik of Yale, and it illustrates the concept of “escalation of commitment.” Once people are trapped into playing, they have a hard time stopping. (Consider Vietnam.) The higher the bidding goes, and the more each bidder has invested, the harder it is to say “uncle.” The best advice you can give anyone invited to play this particular game is to decline.

Some games and battles are like that: even when you win, you lose. When you see at the start that such a dynamic is likely, you’re better off just walking away.

These situations crop up regularly in spheres as diverse as politics, romance and business.

Here's a link to the article from The New York Times, "Paying a High Price for the Thrill of the Hunt," by Richard H. Thaler (11/15/09)

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