The Cobra Effect and Game Theory
When the British Government was in power in India, it launched a program to decrease the population of cobras across the country – the Government provided a reward for each dead snake. As a consequence, people soon starting breeding more snakes in order to increase their earnings. When the Government realized this, it shut down the program – prompting the rest of the snakes to be released, hence further increasing the overall cobra population. This phenomenon where an intended solution to a problem actually makes it worse is called the Cobra Effect.
In order to present the Cobra Effect from a perspective of Game Theory, I have developed a payoff matrix (as depicted below). There are two players in this game: the government and the people. The government has two potential strategies: incentivizing and not incentivizing killing of snakes. The people have two potential strategies too: breeding and not breeding snakes. There are four cases here. If the government incentivizes and the snakes are still breeding, it is a huge advantage for the people since they get rewarded perpetually. If the government incentivizes and the snakes stop breeding, the government has a huge advantage as the program will be successful and the people also have an advantage because there will be no more snakes eventually. If the government does not incentivize and the people breed snakes, no one has an advantage. Lastly, if the government does not incentivize and the people do not breed snakes, it has a net advantage for both of the players.
| Govt. / People | Breed Snakes | Not Breed Snakes |
| Incentivize | 0 , 5 | 5 , 4 |
| Not Incentivize | 0 , -2 | 3 , 3 |
In this game, the pair of strategies (Incentivize, Breed Snakes) is the Nash Equilibrium. There is no incentive for any player, in this case, to move to an alternate strategy and hence this will perpetually go on. This is the case despite the fact (Incentivize, Not Breed Snakes) is the socially optimal pair of strategies. Therefore we see that players reach an overall detrimental decision due to their self-interest despite having an overall better pair of strategies (as we have often seen in this class, such as with the prisoner’s dilemma).
As described in the article, the best way to tackle the cobra effect, such as in this case, is by measuring the balancing the reward with the costs and risks of the strategies of the other player. For example, the British Government could have avoided the cobra effect by reducing the reward such that the costs and risks of breeding snakes are higher than the reward itself.
References:
http://www.etunch.com/business/the-cobra-effect-and-gaming-the-the-talent-game/