The line item example is a bit too complicated for my taste. Here’s a simpler one: let’s say Alice has the option of cooking a pie, but must share half of it with Bob. So Alice cooks the pie and everyone is happy. Now let’s give Bob the option of stealing the whole pie and frustrating Alice. Then Alice won’t cook the pie because she will anticipate that Bob’s optimal decision would leave her without pie and frustrate her, so everyone is worse off.
Thank you very much for this simpler explanation, I couldn’t quite grasp the concept 100%. This also gives me a very easy way to explain this concept less technically.
Very nice that you’re doing this!
The line item example is a bit too complicated for my taste. Here’s a simpler one: let’s say Alice has the option of cooking a pie, but must share half of it with Bob. So Alice cooks the pie and everyone is happy. Now let’s give Bob the option of stealing the whole pie and frustrating Alice. Then Alice won’t cook the pie because she will anticipate that Bob’s optimal decision would leave her without pie and frustrate her, so everyone is worse off.
Thank you very much for this simpler explanation, I couldn’t quite grasp the concept 100%. This also gives me a very easy way to explain this concept less technically.