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Sociality as a defensive response to the threat of loss By Tim Johnson, Mikhai Myagkov and John Orbell Essay

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Updated: Jul 17th, 2020

This article gives an analysis of how individuals use sociality as a defensive response to the risk of loss. This article applies the aspect of the prisoner’s dilemma to address the problem. The prisoner’s dilemma is one of the major problems in the game theory, which helps to understand the reason why two people will not cooperate even though it may be their best interests to do that.

This analysis seeks to find out how people generally react to the risks that usually occurs in social relationships. This article begins by identifying the fact that although people do cooperate, defections also take place often (Tim, Mikhail and John 1).

The main argument of the article revolves around the idea that people will be more willing to enter into a relationship where the game payoffs are framed as losses rather than gains (Tim, Mikhail and John 1).

In other words, this article proposes that people are now more concerned in making decisions which will shield them from dipping into loss rather than gaining. The authors have begun with a critical literature review where they have summarized the previous study which has been conducted on the field. Previous study has revealed that in some cases, people cooperate in the prisoner’s dilemma games where they would choose against their interests. Such decisions lead to maximization of the social welfare.

Tim, Mikhail and John also emphasized on the fact that universal cooperation is very rare (1). This implies that an individual is usually faced with the challenge of concluding on how others are going to decide in the prisoner dilemma’s game. Therefore, an individual will be faced by the dilemma of whether to enter into such game or other wise refrain from entering. They are also faced with the dilemma of choosing the person with whom to enter into the game.

Tim, Mikhail and John have also recognized the fact that the previous literature has barely mentioned anything to do with how people will react to the danger of going into a prisoner’s dilemma games (2). They emphasized on the idea of risk tolerance. Tim, Mikhail and John also discussed about the risk aversion.

For instance, one should not trust strangers. However, if we manage to gather enough information about them we will be able to understand their behaviour. Otherwise, people will refrain from entering into the games with people for whom they don’t have information. People tends to be risk tolerant when the payoff involves losses but risk averse if the payoff in the game involves specific gains (Tim, Mikhail and John 2).

This article has also outlined the utility function. This involves the objective values like lives lost or saved are plotted on the horizontal axis, subjective utility on the vertical axis while the status quo is plotted at the intersection (Tim, Mikhail and John 3).

In this case, the function plotted in the quadrant on the upper right side can be identified with the economic theory of diminishing marginal utility for every life saved. On the other hand, the utility function in the left quadrant in the lower side demonstrates steeply declining losses or the lost lives (Tim, Mikhail and John 3).

This function can be analyzed based on its nature. In this case, one unit loss in the status quo will hurt more than the gain. In other words, for every extra unit of status quo lost, an individual will be hurt more than in the preceding unit. This article has extended on the traditional expected utility which just differentiates losses and gains. It is based on the assumption that probability of the occurrence is the most appropriate measure for risky outcomes.

The prisoner’s dilemma has a significant implication in the concept of sociality. In most cases, people are involved in exchange relationships with each other. The article has identified the fact that the decision made by individuals to enter or not to enter in a relationship is based on the empirical regularity they document (Tim, Mikhail and John 2).

Therefore if all other factors remain constant, it is expected that individuals will tend to take the social risks only in the cases where the payoffs are based on losses rather than gains. This concept can also be applied in political arena. In voting, the voter is faced with a decision to make. For instance, they gauge the available alternatives and choose the best (Plott and Levine 148).

The concept of the prisoner’s dilemma can clearly be explained through a situation where the decisions of two prisoners affect the other. For instance, we have two suspects who are arrested by the police and then confined in two different places. It is assumed that the police do not have enough evidence on the crime the prisoners committed.

Then, the police visit each separately. Both prisoners are then given same deal. In case one prisoner testifies against the other and the other remains silent, then the one who remains silent gets one year term jail while the other is released.

However, if both prisoners choose not to betray each other and therefore remain silent, then they will both be sentenced for only one month in jail. However, if each prisoner betrays the other, they will get a three months jail sentence each. In this case, every prisoner must choose either to defect or to cooperate. That is, they have the opportunity. In this case scenario, it is clear that there is one choice which will maximize the interests of each of the prisoners. The dilemma is now how each of the prisoners is going to act.

If the two suspects are only concerned about minimizing the time they stay in jail, they can either choose to betray or to cooperate with the other. This results into a non-zero sum game because each player may cooperate or defect (Blum and Booth 56). In the prisoner’s dilemma game, each of the participants is determined to maximize their own payoff with no concern on other person’s payoff.

However, both players may choose to betray each other. When both prisoners play defective, the decisions lead to a Pareto sub-optimal solution (Tutor2. par 6). In this situation, every prisoner makes a rational decision. That is, a decision which maximizes their gains (Rapoport and Chammah 124).

In the prisoner’s dilemma, the most dominant choice is defection. Therefore, the only equilibrium solution in this case remains the fact that all the players to defect. This is because the players are assumed to behave rationally (Barash par 4). However, the compensation would have been relatively higher in case both the prisoners decide to cooperate in their decisions.

On the side of the iterated prisoner’s dilemma, this game is played again and again. Unlike in the classical case, the prisoner has the opportunity to punish the other for not cooperating in the previous cases (Edgar 98). According to the economic theory, both players will defect in subsequent cases regardless of the number of times the participants plays.

Cooperation can only be equilibrium when they are allowed to play random number of times or unlimited number of times. However, the problem of betrayal can easily be mitigated through intimidation by threatening to punish those who are engaged in defection (Heylighen par 3).

The prisoners’ dilemma has a significant implication in politics. This is because the actions of individual politicians have a significant impact on others. In some cases, politicians may benefit for cooperation and lose for not doing so (Paul 309). In some cases, politicians do cooperate and gain while in others fails to do so and consequently lose.

The principle of the prisoners can also be applied in other social contexts. According to Myagkov and Orbell, when people are assumed to be free to choose the people with whom to enter into the games with and also to defect or to cooperate can be useful in modeling of markets (3). In such a case, individuals may decide to avoid relationships which they perceive as exploitive and for a more attractive relationship. This may provider an incentive of not defecting.

In politics, the concept of the prisoner’s dilemma can also be applicable. For instance, In case two candidates are free to decide on the policy positions in order to optimize the number of their votes, both will tend to choose the policies which they think will maximize their share (Congleton 4).

However, the decision made by one politician has a significant impact on the other. This can also be demonstrated by the rational choice theory which implies that every individual will trend to make decisions which maximizes their interests (The New York Times February 26, 2000. par 2). This is also applicable at the international level. This can clearly be described through the realism theory which describes how states do or think in an effort to secure their interests (Squidoo par 5).

The game of the prisoner’s dilemma has a significant implication in the field of economics. For instance, advertisement can form a good example of the political dilemma. For instance, there was time when advertisement was illegal in the United State. The decisions made by the individual companies had a significant impact on the other companies. In other words, the success of every company was determined by the decision made by others.

During this period, the success of company X is to some extent determined by the advertisement decisions made by company Y. On the other hand, the returns from the advertisement conducted by firm Y is influenced by the advertisement measures carried by company X. However, in case the two companies choose to advertise simultaneously at the same time, the effect neutralizes itself and the sales remains constant.

Nevertheless, there are increased costs incurred through the advertisement activities. However, in case one company decides not to advertise, then the other one will gain significantly from advertisement. Another case of political dilemma can be illustrated through the case of drugs in spot. Schneier demonstrates a situation where decisions by various players to use performance enhancing drugs affect the performance of others (par 2).

In this case, the most feasible level of advertisement for the company X will be determined by advertisement undertaken by company Y. In this case, both companies can gain significantly if they choose to cooperate. For instance, they can both reduce their operational costs in case they decide to advertise at a level below the equilibrium (Milgrom 306). In case all the companies cooperate and decide not to conduct any advertisement, then every company will reduce its expenses and the profits will generally increase in the industry.

The principle of the game of the prisoner’s dilemma can also be applied in the pricing among cartels. In some cases, a number of companies may decide to set their prices at a certain level. In this case, a company may choose not to adhere to this regulation which implies that they defect. They may also decide to cooperate and keep their prices at the agreed level. The companies which defect in this case gain profits at the expense of others (Hang 59).

Conniff (2001) observed that risky behaviour can also be revealed among other animals. For instance, this can be demonstrated in a phenomenon where an antelope jumps high up into the air when chased by a cheetah. However, it would be more reasonable for the antelope to apply all their energy trying to run horizontally as far as possible. There are also some animals which usually tend to dance just in front of their predators before dodging away.

In conclusion, this article has given a clear analysis of the concept of the prisoner’s dilemma games and its implication in social, political and economic context. It is based on the principle that individuals will tend to act in such a way that they maximize their interests. However, these decisions may in one way or another affect others.

Works Cited

Barash, David. “Rogue Elephants Play Congressional Chicken.” Chronicle, 2011. Web.

Blum, Jonathan and Booth Rupert. The Prisoner’s Dilemma. U.S.A.: Powys Books, 2005.

Congleton, Roger. “Uoregon, 2011. Web.

Conniff Richard. Why We Take Risks. DISCOVER .Vol. 22 No. 12 December 2001.

Edgar David. The Prisoner’s Dilemma. London: Nick Hern Books, 2002.

Hang Amelia. Prisoner’s Dilemma. UK: Lulu.com, 2003.

Heylighen Francis. “Pespmc1, 1995. Web.

Myagkov Misha and Orbell John. “Mindreading and Manipulation in an Ecology of Prisoner’s Dilemma Games: Laboratory Experiments.” Phoenix, 2011. Web.

Rapoport Anatol and Chammah Albert. Prisoner’s Dilemma: A Study In Conflict And Cooperation. Canada: University of Michigan Press, 1965.

Schneier Bruce. “Wired, 2011. Web.

Paul Milgrom. The Evolution of Cooperation. Journal of Economics Volume 15, Number 2, 1984, 305–309.

Plott Charles R. and Levine Michael E. A model of Agenda Influence on Committee Decisions. The American Economic Review, Vol. 68, No. 1. (March 1978), pp. 146-160.

Squidoo. “Realism.” Squidoo, 2011. Web.

The New York Times February 26, 2000. “Political Scientists Debate Theory of `Rational Choice”. Phoenix, 2000. Web.

Tim Johnson, Mikhai Myagkov and John Orbell. Sociality as a Defensive Response to the Threat of Loss. Max Planck Institute for Human Development, Lentzeallee 94, 14195 Berlin, Germany. 2001.

Tutor2. “” Tutor2u, 2011. Web.

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