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Game Theory and Drinking

http://www.wired.com/business/2012/09/st-drink-exchange/

This article on wired talks about a growing phenomenon of implementing a software that dynamically changes drink prices at a bar. If a certain drink is ordered by multiple people, its price rises while all the other drinks drop in price. Plus, there are other factors such as promotions that occasionally cause a drink to drop in price. Not only does this mean no more overpaying for drinks that nobody likes, it also means that with a certain amount of thinking, you can save money, so you can buy even more drinks! This introduces a new layer of nuances in ordering drinks, and most importantly, game theory.

With this new system, there is a lot to think about when ordering. Is it worth paying more to get your favorite drink? The answer depends on each person, whether it makes one happier saving money than getting what he wants. If we knew the exact amount of happiness gained by spending a certain amount of money on certain drinks, we could set up a chart to see what decision the player will make. If he cared a lot about money, he would buy a lot of cheap drinks. In fact, he might even be scared away from buying drinks of his liking since that would help raise the price even more. If he didn’t care much about money, he would simply continue to buy drinks he likes, no matter what the price. For a person who cares about both, he may choose to buy a mix of drinks, new ones in effort to lower the prices of his favorites, and his favorites, when the prices drop to a certain amount.

Another game we could consider in such an environment is two people that have the same taste in drinks. If both players choose to drink something that weren’t their favorites, they could work together to reduce the price for future purchase. However, if only one person does this, only the other person benefits. This is a variant of the Prisoner’s dilemma where both players will choose an option that will make it worse for both of them rather than cooperating. Of course, such isolated games will never occur in real life, but it’s fun thinking about all the possible social experiments we can perform on drinkers with this new system!

– l10f

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