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Tuesday, September 29, 2009

"Come Dine with Me: The Economics"

Chris Dillow says the British TV show Come Dine with Me "raises important issues about the nature of rationality and preferences":

Come Dine With Me: the economics, by Chris Dillow: It’s insufficiently appreciated that Come Dine with Me raises some profound issues in economics. Here are three:
1. The importance of norms of fairness. The format of CDWM is simple. There are four people. Each hosts a dinner party for the other three. The guests score their host out of 10. The person with the highest score wins £1000.
In this game, the optimum strategy for a guest is to score their hosts zero. This would mean the maximum score one’s rival hosts could make would be 20, which in a normal game would not usually be sufficient to win. So, if your three rivals play normally, scoring them zero greatly increases your chances of winning.
If everyone knows this, we end up in a Nash equilibrium in which everyone scores zero; this is a one-shot game with scores revealed only after all four dinner parties, so tit-fot-tat doesn‘t apply.
But this never happens. Even contestants who claim to want to win score their rivals reasonably. This suggests that norms of fairness overwhelm selfish optimization*.
This raises the question, though: why is CDWM so different from Golden Balls - which is a pure Prisoners‘ Dilemma game - where we often see the selfish defect-defect strategy?
The answer, I suspect, lies in the abundance effect. The difference between CDWM and Golden Balls is that in the latter money is much more salient. And research (pdf) shows that, the more people think about money, the more selfish they behave.
The lesson is that context - not just incentives - matter.
2. The trickiness of inter-personal comparisons of utility. Let’s assume that games are scored purely according to perceptions of fairness. It doesn’t follow that everyone has an equal chance.
Take, for example, two people. One is a gourmand, used to fine dining and the highest standards. The other has low expectations. Our gourmand might well score a fair-to-middling dinner much lower than the diner with low standards.  On this account the gourmand would have more chance of winning than the other diner, even if both are cooks of equal ability.
One might question the justice of this. More importantly, it raises the question: why should expressed preferences carry so much weight when they can be heavily affected by factors which should perhaps be irrelevant?
3. The importance of ordering. The four people are strangers. This means the first host is in a different position to the last host. The first is likely to judged heavily on his food, as the guests barely know him. But later hosts are more likely to be judged on personality as well, as by then the four have gotten to know each other. 
This can cause diners to regret their earlier scores. We saw this last night, when Rachel said that, had show known how big an arse Stuart - the first host - was, she would not have scored him so highly.
This poses a big problem for conventional rational choice economics. It typically takes preferences as given, and revealed by choice. However, CDWM shows that preferences are sensitive to the order in which options appear. For Rachel, the choice: “score Stuart, then score Josh“ yielded a different result than “score Josh, then score Stuart“ would have done.  I suspect this is related to Allais’s paradox.
So, CDWM raises important issues about the nature of rationality and preferences. Watched even in narrow economists' terms, it is much more interesting than politicians' waffle about the crisis.
* Or it could be that the producers just tell the contestants not to play silly buggers.

    Posted by on Tuesday, September 29, 2009 at 12:08 AM in Economics | Permalink  Comments (7)


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