If you bid 2$ you get at most 4$. If you bid 100$ you have a decent chance to get much more. If even 10% of people big ~100 and everyone else bids two you are better off bidding 100. Even in a 5% 100$ / 95% 2$ the two strategies ahve a similar expected value. In order for bidding 2$ to be a good strategy you have to assume almost everyone else will bid 2$.
If you bid $2 you get at least $2 (you might get $4 if your partner bids above $2, but there’s no partner bid that can get you less than $2). If you bid anything more than $2, you might get $0, if the other party bids $2. Nash equilibrium is simply the state where no other-player-choice can reduce your payout.
If you’re trying to maximize average/expected payout, and you have some reason to believe that the other player is empathetic, super-rational, or playing a different game than stated (like part of their payout is thinking of themselves as cooperative), you should usually bid $100. Playing against an alien or an algorithm who you expect is extremely loss-averse and trying to maximize their minimum payout, you should do the same and bid $2.
This is true. The issue is that the Nash Equilibrium formulation of TD predicts that everyone else will bid $2, which is counter-intuitive and does not confirm empirical findings.
I’m trying to convince myself that the NE formulation in TD is not entirely rational.
If you bid 2$ you get at most 4$. If you bid 100$ you have a decent chance to get much more. If even 10% of people big ~100 and everyone else bids two you are better off bidding 100. Even in a 5% 100$ / 95% 2$ the two strategies ahve a similar expected value. In order for bidding 2$ to be a good strategy you have to assume almost everyone else will bid 2$.
If you bid $2 you get at least $2 (you might get $4 if your partner bids above $2, but there’s no partner bid that can get you less than $2). If you bid anything more than $2, you might get $0, if the other party bids $2. Nash equilibrium is simply the state where no other-player-choice can reduce your payout.
If you’re trying to maximize average/expected payout, and you have some reason to believe that the other player is empathetic, super-rational, or playing a different game than stated (like part of their payout is thinking of themselves as cooperative), you should usually bid $100. Playing against an alien or an algorithm who you expect is extremely loss-averse and trying to maximize their minimum payout, you should do the same and bid $2.
This is true. The issue is that the Nash Equilibrium formulation of TD predicts that everyone else will bid $2, which is counter-intuitive and does not confirm empirical findings.
I’m trying to convince myself that the NE formulation in TD is not entirely rational.