Thomas Schelling gives many examples of incentivising agreements instead of enforcing them. Here’s one: you and I want to spend 1 million dollars each on producing a nonexcludable common good that will give each of us 1.5 million in revenue. (So each dollar spent on the good creates 1.5 dollars in revenue that have to be evenly split among us both, no matter who spent the initial dollar.) Individually, it’s better for me if you spend the million and I don’t, because this way I end up with 1.75 million instead of 1.5. Schelling’s answer is spreading the investment out in time: you invest a penny, I see it and invest a penny in turn, and so on. This way it costs almost nothing for us both to establish mutual trust from the start, and it becomes rational to keep cooperating every step of the way.
The paradoxical decision theorist would still say, ‘You fool! Don’t put in a penny; your rational opponent won’t reciprocate, and you’ll be out a farthing.’. Fortunately nobody behaves this way, and it wouldn’t be rational to predict it.
I would probably put in half a million right away, if I don’t know you at all other than knowing that you value the good like I do. I’m sure that you can find a way to manipulate me to my detriment if you know that, since it’s based on nothing more than a hunch; and actually this is the sort of place where I would expect to see a lecture as to exactly how you would do so, so please fire away! (Of course, any actual calculation as to how fast to proceed depends on the time discounting and the overhead of it all, so there is no single right answer.)
I agree, slowly building up trust over time is an excellent tactic. Looking up somebody’s trust metric is only for strangers.
What Nesov said.
Thomas Schelling gives many examples of incentivising agreements instead of enforcing them. Here’s one: you and I want to spend 1 million dollars each on producing a nonexcludable common good that will give each of us 1.5 million in revenue. (So each dollar spent on the good creates 1.5 dollars in revenue that have to be evenly split among us both, no matter who spent the initial dollar.) Individually, it’s better for me if you spend the million and I don’t, because this way I end up with 1.75 million instead of 1.5. Schelling’s answer is spreading the investment out in time: you invest a penny, I see it and invest a penny in turn, and so on. This way it costs almost nothing for us both to establish mutual trust from the start, and it becomes rational to keep cooperating every step of the way.
The paradoxical decision theorist would still say, ‘You fool! Don’t put in a penny; your rational opponent won’t reciprocate, and you’ll be out a farthing.’. Fortunately nobody behaves this way, and it wouldn’t be rational to predict it.
I would probably put in half a million right away, if I don’t know you at all other than knowing that you value the good like I do. I’m sure that you can find a way to manipulate me to my detriment if you know that, since it’s based on nothing more than a hunch; and actually this is the sort of place where I would expect to see a lecture as to exactly how you would do so, so please fire away! (Of course, any actual calculation as to how fast to proceed depends on the time discounting and the overhead of it all, so there is no single right answer.)
I agree, slowly building up trust over time is an excellent tactic. Looking up somebody’s trust metric is only for strangers.