WEBVTT

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[SQUEEKING]
[RUSTLING] [CLICKING]

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PROFESSOR: All right.

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Sorry about this.

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Hello.

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Sorry about this.

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There's some internet problems.

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I was just actually talking
to MIT's president, who

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was in the economics
department, talking how MIT can

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be a leader in technologies.

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Apparently, good internet
is not a part of that.

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But anyway, so
we're going to play

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a number of games which
are standard games

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to measure social preferences.

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You might have a lot of
questions about those

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eventually, you
know, what exactly

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do they measure,
how do we interpret

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certain results, and so on.

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We're going to discuss these
in the next few classes,

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but for now,
essentially, I just want

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to show you how
these games work.

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You can sort of
experience them pretty

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close to what an actual
participant of such a game

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would experience.

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One big difference, of course,
is that usually, these games

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are played in private.

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Usually, you shouldn't talk
very much to your neighbor.

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One big difference
as well is like,

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we can actually
implement some of these,

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randomly implement some of the
choices that are being made,

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so that makes it
sort of more public

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than in a typical experiment.

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So you know, you should be aware
of that like whatever choices

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you may make, whether
they're nice or not,

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they might actually be
implemented and be public,

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so that may or may not
affect the way you choose.

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You should sort of choose
truthfully or the way

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you would like to choose.

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Don't let that sort of
influence you too much.

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OK.

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So what we're going
to do is we're

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going to start with the
simplest of our games,

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which is called the dictator
game, which you can see here.

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Can you guys see the game?

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Can you join?

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So try to join
the game as it is.

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So the way this game works is--

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I hope these inspections work.

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OK, so the way this
works is essentially,

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it's a split the pie game.

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We're going to figure out
what's going on with the volume

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because it's a different
laptop, but essentially, the way

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this works is like you're
going to be endowed

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with an amount of money.

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There's going to be two people.

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There's going to be
essentially what we call

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the divider or the dictator.

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That's the person
who gets the money.

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That person can
decide how much money

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he or she wants to share
with another person who

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was randomly selected.

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The amounts will be-- this is
so far entirely hypothetical--

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so the amounts will be
here, currently, it's $100.

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I hate to break it to you.

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You will not be able
to win $100 today.

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I know, I know.

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It's $100.

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You can essentially decide
between you and a randomly

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selected other
person how much you

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would like to give of that
money to that other person.

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It's the simplest of our games.

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There's going to be the
divider and the receiver.

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The receiver actually
does nothing other

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than just receiving
money potentially.

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The divider is the
person to do that.

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OK.

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Again, I'm going to show
you some results in a bit,

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but one big issue that people
often have about these dictator

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kinds of games is to say,
well, do you need real stakes

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or do you need like
fake stakes and so on.

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So what I have here
is I have some candy

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and I have some apples,
and later some money.

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I'm going to start with candy.

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So these are Swiss chocolate.

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So the way this
is going to be is

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like there's going to
be always 10 of them,

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so 10 is sort of like
the overall amount that's

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being shared.

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Now, what I'm going
to do is you're

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going to decide as if you
were going to be selected.

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Of course, I'm going to only
select one pair of people,

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and that pair is actually going
to be actually implemented, OK.

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And that is going to be 10, and
sort of like the 100, you know,

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the percentage of the
candy that's being shared

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is going to get to
the other person.

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You should probably
use round numbers.

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Otherwise, you have to sort
of like share them in parts.

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I'm going to pick a number, 50.

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So this will be
hopefully working.

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It's Brian and Jackie.

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So Brian was the dictator,
yes, the person giving?

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Yes?

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Where's Brian?

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What did Brian do?

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AUDIENCE: [INAUDIBLE].

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PROFESSOR: There we go.

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So here's your candy.

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You can pick it up.

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So this is sort of the issue
with the public version

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of this.

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You should feel
free to do whatever

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you would like, of course.

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Now, we're going to
do the same thing.

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I brought 10 apples as well.

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We have BG, whoever you are.

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AUDIENCE: [INAUDIBLE].

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PROFESSOR: Yes, and how
many apples did you--

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AUDIENCE: I took three apples.

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PROFESSOR: That's
three apples for you

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and seven apples
for Lauren, I guess.

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Here you are.

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AUDIENCE: Thank you.

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PROFESSOR: They're good apples.

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You can share them with
others as well if you like.

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Now we're going to do the
typical version of this,

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which is money.

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Usually, people do this
with $5, $10 and so on.

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We're going to do
$5 now, so we have

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to figure out some way of
sharing it, Venmo or whatever.

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I'm not quite sure, but I'm
sure you'll figure it out.

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Number five.

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MJ?

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What'd you do?

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AUDIENCE: I gave $2 or 40%.

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PROFESSOR: I see.

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You have to figure out some
way of giving $2 to Isabel,

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wherever she is.

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But here's the $5.

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So now, something
that people often say

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is like, well, maybe for
$5, is that a lot of money?

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Maybe not, so
we're going to do--

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maybe the stakes matter, and
some sort of small stakes

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and so on, people
decide in certain ways.

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Now I don't have a lot
of money, actually.

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This is mostly like, I don't
have more cash with me,

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so like the largest
stake I can do is $20.

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So we're going to, with $20
now, do the exact same thing.

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All right, how about number 80?

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Alvin and Julia,
what did you do?

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AUDIENCE: I gave $5.

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PROFESSOR: Very nice.

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Here you go.

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You have to figure out a
way to actually do that.

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Now there's a couple more
things that, perhaps, one

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wants to vary here.

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So one is communication.

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So far I think you're not
allowed to communicate.

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Is that right?

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So you could not communicate
with the other person.

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So now what we're going
to do is like a version--

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the exact same thing.

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I think that this will
be $10 but the same,

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but now it actually
allows for communication.

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So now the sender and the
receiver can communicate.

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The receiver can, sort of,
try different things to,

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like, influence, perhaps,
the descender in some ways

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of eliciting more money.

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So Jenka and [INAUDIBLE],,
where are you?

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AUDIENCE: We
haven't [INAUDIBLE]..

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PROFESSOR: What was that?

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You haven't decided, no?

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AUDIENCE: [INAUDIBLE]

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PROFESSOR: What was that?

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AUDIENCE: Seven.

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PROFESSOR: I see,
and what was the--

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did you get any
message that conveyed

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or that made you nicer or no?

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AUDIENCE: Yeah, so I was going
to keep everything to my self.

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But yeah, I was
going to [INAUDIBLE]..

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PROFESSOR: I see.

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So some communication that
seems to help this case.

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So here's $10.

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You have to figure out how
to actually now give $2.

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Now another I that
you might think

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might matter quite
a bit, which is

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I'm, sort of, like putting
you on the spot quite a bit.

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Like, I'm sort of like
publicizing how much money you

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gave in front of everybody.

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So in some sense, you might
want to actually keep the $10

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or you might want to give a
lot or whatever and, like,

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by just the fact that like
showing that to everybody

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might influence your choices.

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So we're going to do one
version, which is not

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quite private but, sort of,
close to getting private,

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which is like I'm just going
to announce which team it was.

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And at the end of
the class, you'll

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tell me what the
outcome was and you

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get the-- or I guess, so you
see what the other person does

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with you.

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I see.

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So then the two of you
can just essentially then

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sort of split the money.

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It's, sort of,
not quite private,

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because the other
person obviously you

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have to interact
with another person.

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You should keep that
in mind, but it's

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not like everybody in
class will notice it, OK.

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Is it clear what
I'm asking everyone?

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Yeah, so this is private
to the extent like private

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towards your other classmates
except for the person

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that you're matched with, OK.

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So this is, again,
$10, and this is

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the last $10 I actually have.

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So I have more candy.

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All right.

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All right, so here--

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where is [INAUDIBLE]?

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Here.

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So you get the $10.

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You just have to
find your partner.

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Who is it?

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OK, so you have to, sort
of, settle that with her.

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I'll stay out of this.

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OK.

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We're going to do more.

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And this is the last one.

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We're going to do
more of communication.

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Perhaps you learned about how
to best communicate or the like.

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I think, in most of
the remaining grounds,

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we're just going to do a 10
candies or 10 chocolates,

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whatever each.

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So this one is, again,
with communication.

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So you can chat and try
to figure out perhaps,

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as a receiver, how to
best influence the sender.

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All right, so let's see.

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By the way, you can
be repeatedly chosen.

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So we have E1.

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What did you do?

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AUDIENCE: 50/50

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PROFESSOR: Nice to hear.

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And here's Arthur.

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AUDIENCE: [INAUDIBLE]

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PROFESSOR: Here's
your other part.

00:11:45.460 --> 00:11:47.710
These are yours, yeah.

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Go for it.

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OK, so what are
some good messages?

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Or what are some
compelling messages

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that you received of any--

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or maybe funny ones?

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Yes?

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AUDIENCE: [INAUDIBLE]

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PROFESSOR: What was that?

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AUDIENCE: Lactose intolerant.

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PROFESSOR: You are lactose
intolerant or the receiver?

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AUDIENCE: [INAUDIBLE].

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The giver was
actually [INAUDIBLE]..

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PROFESSOR: I see.

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AUDIENCE: They're
giving everything.

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PROFESSOR: I see.

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So here's a giver that
is lactose intolerant.

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You could have given it,
instead of the other classmate,

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you could have also just given
it to your friend as a giver.

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But yes.

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What else?

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Was there any
compelling messages

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that you received that actually
worked or did something?

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Yes?

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AUDIENCE: I wasn't deciding,
but the person told me,

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that if I tell them a joke
that makes them laugh,

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they'll give me chocolate.

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[LAUGHTER]

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PROFESSOR: And did you?

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AUDIENCE: Yeah.

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They gave me 40, so--

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PROFESSOR: Not bad, so--

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[LAUGHTER]

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Maybe you need to work
on the jokes, but yes.

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[LAUGHTER]

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All right, so now
we're going to choose--

00:12:51.110 --> 00:12:53.360
play a second game, which
is called the-- sorry,

00:12:53.360 --> 00:12:57.370
let me close this-- which is
called the Ultimatum game.

00:12:57.370 --> 00:13:00.410
So the Dictator game is
a nice game in a sense.

00:13:00.410 --> 00:13:01.770
It's a very simple game.

00:13:01.770 --> 00:13:04.100
It's a very stark game
and very, in some sense,

00:13:04.100 --> 00:13:07.610
good at capturing a
form of pure altruism.

00:13:07.610 --> 00:13:08.630
Here's your money.

00:13:08.630 --> 00:13:09.900
Here's the other person.

00:13:09.900 --> 00:13:11.900
How much money you want
to give for that person?

00:13:11.900 --> 00:13:13.860
There's often, no communication.

00:13:13.860 --> 00:13:15.780
Often, it's even
anonymous, and so on.

00:13:15.780 --> 00:13:17.660
So it's essentially,
just like, how much

00:13:17.660 --> 00:13:20.330
do you care about yourself,
versus some other person?

00:13:20.330 --> 00:13:21.590
So that's very simple.

00:13:21.590 --> 00:13:23.570
But when you think about
real-world situation,

00:13:23.570 --> 00:13:26.510
often, there's
interactions across people.

00:13:26.510 --> 00:13:33.150
And the Dictator game cannot
really capture that that well.

00:13:33.150 --> 00:13:36.860
So one of the second
perhaps most famous

00:13:36.860 --> 00:13:40.940
or a game [INAUDIBLE] is what's
called the Ultimatum game.

00:13:40.940 --> 00:13:42.500
We have, again, instructions.

00:13:42.500 --> 00:13:48.680
I think you can't really
necessarily hear the narration,

00:13:48.680 --> 00:13:49.843
but--

00:13:49.843 --> 00:13:50.510
[VIDEO PLAYBACK]

00:13:50.510 --> 00:13:52.670
- You're going to be
randomly placed into groups.

00:13:52.670 --> 00:13:53.660
PROFESSOR: Sort of.

00:13:53.660 --> 00:13:56.090
- One player in each
pair is the proposer.

00:13:56.090 --> 00:13:58.460
The other is the responder.

00:13:58.460 --> 00:14:00.490
The first thing that will
happen is the proposer

00:14:00.490 --> 00:14:02.719
proposes how to divide a sum.

00:14:02.719 --> 00:14:03.302
[END PLAYBACK]

00:14:03.302 --> 00:14:05.090
PROFESSOR: Does it work?

00:14:05.090 --> 00:14:05.910
No.

00:14:05.910 --> 00:14:06.560
sorry.

00:14:06.560 --> 00:14:08.510
So there's a proposer,
and there's there's a--

00:14:08.510 --> 00:14:10.190
[INAUDIBLE], turn this off.

00:14:10.190 --> 00:14:12.060
There's a proposer,
and there's a receiver.

00:14:12.060 --> 00:14:15.980
The proposer, as in
the Dictator game,

00:14:15.980 --> 00:14:18.610
proposes a sum amount
of money, as you see.

00:14:21.610 --> 00:14:23.890
And then the other person,
who is the receiver,

00:14:23.890 --> 00:14:27.140
the responder can
accept or reject.

00:14:27.140 --> 00:14:27.640
OK?

00:14:27.640 --> 00:14:33.190
So if somebody says, if I have
10 candy, if I offer you 1,

00:14:33.190 --> 00:14:34.810
you might say,
that's not very nice.

00:14:34.810 --> 00:14:36.280
And you might reject it.

00:14:36.280 --> 00:14:37.870
Or you might say,
actually, I'd rather

00:14:37.870 --> 00:14:40.330
have one candy than zero
candy, and I accept it.

00:14:40.330 --> 00:14:42.790
And for each of these amounts,
you can make a choice.

00:14:42.790 --> 00:14:48.070
But when you are the
first person choosing,

00:14:48.070 --> 00:14:49.870
you need to take
into account what

00:14:49.870 --> 00:14:53.230
the other person might do for
different offers that you have.

00:14:53.230 --> 00:14:56.110
If the offer is rejected, you
essentially-- neither of you

00:14:56.110 --> 00:14:57.130
receives anything.

00:14:57.130 --> 00:14:59.470
If it's accepted,
it's just implemented

00:14:59.470 --> 00:15:02.380
as what the proposal was.

00:15:02.380 --> 00:15:03.370
Any questions on that?

00:15:07.860 --> 00:15:08.360
OK.

00:15:15.850 --> 00:15:23.710
And we're still playing
for Lindt chocolates.

00:15:23.710 --> 00:15:27.210
[CLASSROOM CHATTER]

00:15:29.210 --> 00:15:32.860
AUDIENCE: I did
50/50 [INAUDIBLE]..

00:15:32.860 --> 00:15:35.200
PROFESSOR: Wise
choice, Here you are.

00:15:35.200 --> 00:15:39.310
So Vijay, and
yeah, Here you are.

00:15:39.310 --> 00:15:41.290
OK.

00:15:41.290 --> 00:15:42.430
So we're going to do the--

00:15:45.023 --> 00:15:45.690
let me see here.

00:15:53.000 --> 00:15:55.950
[INAUDIBLE]

00:15:55.950 --> 00:15:56.450
I see.

00:15:56.450 --> 00:15:59.040
We're going to play
the same thing again,

00:15:59.040 --> 00:16:00.578
but in rotated roles.

00:16:00.578 --> 00:16:02.870
So that's usually not what
people would necessarily do.

00:16:02.870 --> 00:16:05.203
Because usually, it would be
essentially one-shot games.

00:16:05.203 --> 00:16:07.670
It was very clean in the sense
of expectations are clear.

00:16:07.670 --> 00:16:10.430
This is a little bit just for
you to see the other side.

00:16:10.430 --> 00:16:12.740
I think this is now--

00:16:12.740 --> 00:16:14.600
I think it is with
the same person.

00:16:22.110 --> 00:16:24.708
It might just be that
the roles are rotated.

00:16:24.708 --> 00:16:27.250
I don't know if you can see what
the other-- can you actually

00:16:27.250 --> 00:16:28.900
see the name of the other
person when you player, or no?

00:16:28.900 --> 00:16:29.680
AUDIENCE: [INAUDIBLE]

00:16:29.680 --> 00:16:30.388
PROFESSOR: I see.

00:16:30.388 --> 00:16:34.718
So I think it might
not be the same person.

00:16:34.718 --> 00:16:36.010
Sorry, I should know this, but.

00:16:38.962 --> 00:16:42.406
[CLASSROOM CHATTER]

00:16:44.374 --> 00:16:45.721
AUDIENCE: [INAUDIBLE]

00:16:45.721 --> 00:16:46.888
PROFESSOR: Guess that's you.

00:16:46.888 --> 00:16:49.422
AUDIENCE: [INAUDIBLE]

00:16:49.422 --> 00:16:50.380
PROFESSOR: Here you go.

00:16:50.380 --> 00:16:53.470
I think she's up there.

00:16:53.470 --> 00:16:55.840
Now we're going to
do the same thing,

00:16:55.840 --> 00:16:57.470
but entails communication.

00:16:57.470 --> 00:17:00.400
So that is to say
now, as a receiver,

00:17:00.400 --> 00:17:02.890
you can talk to
the other person.

00:17:02.890 --> 00:17:03.730
You can discuss.

00:17:03.730 --> 00:17:07.960
Or as a giver, you
can discuss about,

00:17:07.960 --> 00:17:10.609
if I make you this offer,
will you accept it or not?

00:17:10.609 --> 00:17:14.650
And of course, the receiver
will have some thoughts

00:17:14.650 --> 00:17:17.057
and try to sort make
the case of yes or no.

00:17:17.057 --> 00:17:18.849
And you'll see that
has a somewhat slightly

00:17:18.849 --> 00:17:20.484
different dynamic.

00:17:20.484 --> 00:17:23.109
So again, same game now, except
for now, there's communication.

00:17:23.109 --> 00:17:24.484
You can talk to
the other person.

00:17:28.267 --> 00:17:29.725
One person is
playing with a robot,

00:17:29.725 --> 00:17:31.260
so I guess you can't really--

00:17:31.260 --> 00:17:32.407
[LAUGHTER]

00:17:32.407 --> 00:17:34.030
--communicate.

00:17:34.030 --> 00:17:34.530
Sorry.

00:17:39.150 --> 00:17:41.370
Because it's just because
there's uneven numbers,

00:17:41.370 --> 00:17:43.692
and I'm trying to finish up.

00:17:43.692 --> 00:17:44.756
All right, so--

00:17:48.780 --> 00:17:51.720
AUDIENCE: Oh, [INAUDIBLE].

00:17:51.720 --> 00:17:54.717
The person gave me 100.

00:17:54.717 --> 00:17:55.800
PROFESSOR: Did you accept?

00:17:55.800 --> 00:17:56.760
AUDIENCE: Yeah, I accepted.

00:17:56.760 --> 00:17:57.760
PROFESSOR: There you go.

00:17:57.760 --> 00:17:59.070
[LAUGHTER]

00:17:59.070 --> 00:17:59.880
Lucky you.

00:17:59.880 --> 00:18:01.580
AUDIENCE: But who is it?

00:18:01.580 --> 00:18:03.023
[LAUGHTER]

00:18:03.023 --> 00:18:04.190
PROFESSOR: Very nice of you.

00:18:04.190 --> 00:18:05.773
AUDIENCE: Oh, well,
I'll pay you back.

00:18:05.773 --> 00:18:07.410
PROFESSOR: Are you the lacto?

00:18:07.410 --> 00:18:09.240
Are you the lactose intolerant?

00:18:09.240 --> 00:18:09.740
No.

00:18:13.233 --> 00:18:15.229
[LAUGHTER]

00:18:15.229 --> 00:18:23.100
All right, now we're going
to do the same thing again

00:18:23.100 --> 00:18:25.920
in private, just to see
whether your choices in private

00:18:25.920 --> 00:18:28.950
perhaps are different from the--

00:18:35.200 --> 00:18:37.550
so it is in private
with communication,

00:18:37.550 --> 00:18:39.670
so as in you can communicate.

00:18:39.670 --> 00:18:42.210
But again, it's not
public, at least

00:18:42.210 --> 00:18:43.960
to your other classmates,
what is actually

00:18:43.960 --> 00:18:46.867
the outcome of the game.

00:18:46.867 --> 00:18:48.700
I think I'm running out
of Swiss chocolates.

00:18:48.700 --> 00:18:50.990
So now you have to get
some Snickers instead--

00:18:50.990 --> 00:18:52.280
AUDIENCE: Woo, woo.

00:18:52.280 --> 00:18:54.322
PROFESSOR: --which is
worse, I think, but anyway.

00:18:56.740 --> 00:18:58.400
What did you offer?

00:18:58.400 --> 00:18:58.900
What's that?

00:18:58.900 --> 00:19:01.028
AUDIENCE: I probably
received three--

00:19:01.028 --> 00:19:01.570
AUDIENCE: Oh.

00:19:01.570 --> 00:19:02.875
AUDIENCE: [INAUDIBLE].

00:19:02.875 --> 00:19:04.876
PROFESSOR: Three--
did you say 330?

00:19:04.876 --> 00:19:06.190
AUDIENCE: [INAUDIBLE]

00:19:06.190 --> 00:19:08.556
AUDIENCE: I gave
him 3.1 chocolates.

00:19:08.556 --> 00:19:09.556
PROFESSOR: You have to--

00:19:09.556 --> 00:19:10.432
[LAUGHTER]

00:19:10.432 --> 00:19:12.133
You guys can deal with that.

00:19:12.133 --> 00:19:15.310
[LAUGHTER]

00:19:15.310 --> 00:19:17.920
Here you go.

00:19:17.920 --> 00:19:18.880
I stay out of this.

00:19:22.345 --> 00:19:24.260
AUDIENCE: He's [INAUDIBLE].

00:19:24.260 --> 00:19:25.212
AUDIENCE: [INAUDIBLE].

00:19:25.212 --> 00:19:26.640
Thank you very much.

00:19:26.640 --> 00:19:28.068
[LAUGHTER]

00:19:28.068 --> 00:19:33.270
PROFESSOR: All right, we
can do one more of these.

00:19:33.270 --> 00:19:35.080
I also have--

00:19:35.080 --> 00:19:36.455
I brought some
chocolate bunnies.

00:19:39.930 --> 00:19:43.070
These are very nice
bunnies, so here you go.

00:19:48.280 --> 00:19:52.287
This is again with
communication.

00:19:52.287 --> 00:19:53.620
So I was saying this is private.

00:19:53.620 --> 00:19:54.370
I guess it wasn't private.

00:19:54.370 --> 00:19:54.870
Sorry.

00:19:54.870 --> 00:19:55.980
Forget about this.

00:19:55.980 --> 00:19:58.300
This is in public
with communication.

00:19:58.300 --> 00:20:01.960
So I should have been clear.

00:20:01.960 --> 00:20:03.250
Isabel and Hannah.

00:20:08.240 --> 00:20:10.850
What did you do?

00:20:10.850 --> 00:20:12.198
AUDIENCE: We did [INAUDIBLE].

00:20:12.198 --> 00:20:13.490
PROFESSOR: And it was accepted?

00:20:13.490 --> 00:20:14.280
AUDIENCE: Yes.

00:20:14.280 --> 00:20:16.866
PROFESSOR: All right, lucky you.

00:20:16.866 --> 00:20:20.594
[LAUGHTER]

00:20:22.460 --> 00:20:26.510
OK, so now, one main
thing about these games

00:20:26.510 --> 00:20:29.990
is, when you notice this,
it's like, in particular,

00:20:29.990 --> 00:20:31.850
from the receiver's
part, there's

00:20:31.850 --> 00:20:34.650
only one action that you see
for one realization, right?

00:20:34.650 --> 00:20:36.650
So it's not very efficient
in terms of eliciting

00:20:36.650 --> 00:20:38.120
a lot of information.

00:20:38.120 --> 00:20:41.660
In the sense of if I ask you,
how much money did you give?

00:20:41.660 --> 00:20:44.450
And I'm going to see what
you do as the first mover.

00:20:44.450 --> 00:20:46.520
And then, for a
specific realization,

00:20:46.520 --> 00:20:50.735
you see, what does this
person do as a second mover?

00:20:50.735 --> 00:20:52.610
Instead, what you can
do is we can use what's

00:20:52.610 --> 00:20:56.210
called the strategy method,
which we are, in some sense,

00:20:56.210 --> 00:20:58.940
already doing, in the sense
of the strategy method

00:20:58.940 --> 00:21:01.200
is to say, in case
a certain thing,

00:21:01.200 --> 00:21:03.050
in case a certain
situation occurs,

00:21:03.050 --> 00:21:04.860
and that situation
will be implemented,

00:21:04.860 --> 00:21:06.613
what would you do
in that situation?

00:21:06.613 --> 00:21:08.030
And there's a
positive probability

00:21:08.030 --> 00:21:09.570
that this actually happens.

00:21:09.570 --> 00:21:11.390
And so therefore,
people are incentivized

00:21:11.390 --> 00:21:12.987
to behave optimally.

00:21:12.987 --> 00:21:15.320
In the sense, that's exactly
what we're doing right now.

00:21:15.320 --> 00:21:17.240
In some sense there's
80 different pairs

00:21:17.240 --> 00:21:19.520
that are playing, and I'm
randomly just quasi randomly

00:21:19.520 --> 00:21:20.900
selecting just one.

00:21:20.900 --> 00:21:23.030
So this is already
a strategy method.

00:21:23.030 --> 00:21:24.500
In a sense, I'm
asking you, in case

00:21:24.500 --> 00:21:27.020
you are selected, what
would you like to do?

00:21:27.020 --> 00:21:29.660
So I'm eliciting
information from 80 people

00:21:29.660 --> 00:21:32.570
at the same time,
while only having

00:21:32.570 --> 00:21:36.740
to pay out 10 chocolates or
chocolate bunnies, or whatever,

00:21:36.740 --> 00:21:38.643
at one time for the result.

00:21:38.643 --> 00:21:40.310
So that's essentially
a way of creating.

00:21:40.310 --> 00:21:42.290
If you wanted to run
large experiments,

00:21:42.290 --> 00:21:45.170
that's a way of
running experiments

00:21:45.170 --> 00:21:46.160
where there are stakes.

00:21:46.160 --> 00:21:48.440
And sometimes, it doesn't
matter what you choose,

00:21:48.440 --> 00:21:51.980
but it's much cheaper to do and
much more feasible to do so.

00:21:51.980 --> 00:21:55.310
Now, the strategy method is
going a little bit further.

00:21:55.310 --> 00:21:57.440
What the strategy method
essentially is doing,

00:21:57.440 --> 00:22:01.640
it is essentially just
asking you explicitly,

00:22:01.640 --> 00:22:03.818
it's asking you
explicitly as a proposer,

00:22:03.818 --> 00:22:04.860
how much would you offer?

00:22:04.860 --> 00:22:06.590
So it's asking
essentially both people.

00:22:06.590 --> 00:22:10.220
As a proposer, each person is
asked, if you were proposing,

00:22:10.220 --> 00:22:11.720
what would you do?

00:22:11.720 --> 00:22:16.160
And then it's
asking each person,

00:22:16.160 --> 00:22:17.870
as a responder,
what's the smallest

00:22:17.870 --> 00:22:19.970
offer that you would accept?

00:22:19.970 --> 00:22:22.430
Notice, if I have those two
pieces, if I match two people,

00:22:22.430 --> 00:22:25.025
I can play the entire game
for any realization, because I

00:22:25.025 --> 00:22:27.710
know, essentially, the
fully contingent plan.

00:22:27.710 --> 00:22:29.870
In that way, I'm eliciting
way more information

00:22:29.870 --> 00:22:32.360
than just realizing-- and
essentially, for each person,

00:22:32.360 --> 00:22:36.470
I'm going to elicit both what
they're doing in both roles.

00:22:36.470 --> 00:22:40.520
And for the responder,
I'm eliciting also,

00:22:40.520 --> 00:22:42.650
for all potential
realization, as opposed

00:22:42.650 --> 00:22:44.930
to just if you
received $3 or $5,

00:22:44.930 --> 00:22:47.050
or whatever, what would you do?

00:22:47.050 --> 00:22:52.190
OK, so we're going to
do that right now I

00:22:52.190 --> 00:22:53.165
guess with Snickers.

00:22:56.420 --> 00:22:58.520
So now it's not clear
who actually your partner

00:22:58.520 --> 00:23:00.590
is, because now it's
essentially you're choosing

00:23:00.590 --> 00:23:02.780
for all contingent plans.

00:23:02.780 --> 00:23:07.940
So it's not obvious what your
other partner will actually do.

00:23:07.940 --> 00:23:10.880
You are essentially
deciding, independent of what

00:23:10.880 --> 00:23:14.450
my partner does, for all
scenarios what I'm going to do.

00:23:14.450 --> 00:23:16.220
And then, essentially
randomly, you

00:23:16.220 --> 00:23:19.650
will be matched with somebody.

00:23:19.650 --> 00:23:24.075
So why don't you tell me two
numbers between 1 and 60.

00:23:24.075 --> 00:23:25.025
AUDIENCE: 23.

00:23:25.025 --> 00:23:26.290
PROFESSOR: 23 and?

00:23:26.290 --> 00:23:27.150
AUDIENCE: 52.

00:23:27.150 --> 00:23:28.290
PROFESSOR: 23 and 52.

00:23:28.290 --> 00:23:30.270
So I'm going to just
pick number 23 and 52.

00:23:30.270 --> 00:23:32.910
We're going to take the
offer from, what, 23

00:23:32.910 --> 00:23:35.910
and then the response from 52.

00:23:35.910 --> 00:23:39.240
And I asked you to remember
what you chose, hopefully.

00:23:39.240 --> 00:23:40.380
So 23 is--

00:23:42.762 --> 00:23:44.470
I don't know how to
pronounce your name--

00:23:44.470 --> 00:23:45.968
[INAUDIBLE]?

00:23:45.968 --> 00:23:47.260
How do you pronounce your name?

00:23:47.260 --> 00:23:48.260
AUDIENCE: [INAUDIBLE]

00:23:48.260 --> 00:23:50.505
PROFESSOR: [INAUDIBLE],,
what did you propose?

00:23:50.505 --> 00:23:52.150
AUDIENCE: I proposed to do half.

00:23:52.150 --> 00:23:52.960
PROFESSOR: Half?

00:23:52.960 --> 00:23:53.680
OK.

00:23:53.680 --> 00:23:55.897
And then what did
you do, the 50--

00:23:55.897 --> 00:23:56.480
AUDIENCE: Two.

00:23:56.480 --> 00:24:01.000
PROFESSOR: 52, which is Brandon.

00:24:01.000 --> 00:24:02.590
So now the question
is, for half,

00:24:02.590 --> 00:24:04.060
if you were offered
half, Brandon,

00:24:04.060 --> 00:24:05.480
what would you actually do?

00:24:05.480 --> 00:24:05.980
Yeah?

00:24:05.980 --> 00:24:07.018
AUDIENCE: [INAUDIBLE]

00:24:07.018 --> 00:24:08.560
PROFESSOR: And you'd
also accepted it

00:24:08.560 --> 00:24:09.830
earlier in your round?

00:24:09.830 --> 00:24:10.510
[LAUGHTER]

00:24:10.510 --> 00:24:11.350
OK.

00:24:11.350 --> 00:24:12.080
Yes, here you go.

00:24:12.080 --> 00:24:15.643
And so essentially,
that's the way

00:24:15.643 --> 00:24:16.810
this is usually implemented.

00:24:16.810 --> 00:24:20.380
So now essentially, for
that specific contingency,

00:24:20.380 --> 00:24:21.860
that's now being implemented.

00:24:21.860 --> 00:24:23.950
But now I know
essentially what Brandon

00:24:23.950 --> 00:24:25.450
would have done
for all scenarios,

00:24:25.450 --> 00:24:29.532
because he gave me his
fully contingent plan.

00:24:29.532 --> 00:24:31.740
We're going to do the exact
same thing again, in case

00:24:31.740 --> 00:24:32.740
this wasn't fully clear.

00:24:40.565 --> 00:24:41.940
So I don't know
actually why they

00:24:41.940 --> 00:24:43.740
are making groups out of this.

00:24:43.740 --> 00:24:47.250
But whatever, it's fine.

00:24:47.250 --> 00:24:49.345
Abby?

00:24:49.345 --> 00:24:50.220
AUDIENCE: [INAUDIBLE]

00:24:50.220 --> 00:24:50.845
PROFESSOR: Yes.

00:24:50.845 --> 00:24:51.810
What did you propose?

00:24:51.810 --> 00:24:54.000
AUDIENCE: [INAUDIBLE].

00:24:54.000 --> 00:24:54.802
PROFESSOR: Eight?

00:24:54.802 --> 00:24:55.962
AUDIENCE: 50.

00:24:55.962 --> 00:24:56.920
PROFESSOR: Was that 30?

00:24:56.920 --> 00:24:57.462
AUDIENCE: 50.

00:24:57.462 --> 00:24:58.410
PROFESSOR: 50-- sorry.

00:24:58.410 --> 00:24:59.155
And--

00:24:59.155 --> 00:25:00.030
AUDIENCE: [INAUDIBLE]

00:25:00.030 --> 00:25:00.690
PROFESSOR: But you--

00:25:00.690 --> 00:25:01.565
AUDIENCE: [INAUDIBLE]

00:25:01.565 --> 00:25:02.190
PROFESSOR: No.

00:25:02.190 --> 00:25:02.690
Sorry.

00:25:02.690 --> 00:25:03.240
It was 8 and?

00:25:03.240 --> 00:25:03.900
AUDIENCE: 13.

00:25:03.900 --> 00:25:08.545
PROFESSOR: 13 is Brian.

00:25:08.545 --> 00:25:10.970
AUDIENCE: [INAUDIBLE]

00:25:10.970 --> 00:25:12.290
PROFESSOR: So we've got--

00:25:12.290 --> 00:25:12.921
here you go.

00:25:15.750 --> 00:25:17.345
You guys are pretty nice.

00:25:17.345 --> 00:25:19.165
[LAUGHTER]

00:25:19.165 --> 00:25:22.239
In previous years,
we're not that nice.

00:25:22.239 --> 00:25:26.030
AUDIENCE: [INAUDIBLE]

00:25:26.030 --> 00:25:29.090
AUDIENCE: [INAUDIBLE]

00:25:29.090 --> 00:25:30.350
PROFESSOR: All right.

00:25:30.350 --> 00:25:31.940
So now we're going to
play the third game, which

00:25:31.940 --> 00:25:33.830
has been used a lot in
this literature, which

00:25:33.830 --> 00:25:36.290
is called the Trust game.

00:25:39.470 --> 00:25:43.310
The Trust game works as follows.

00:25:48.120 --> 00:25:57.890
So there is a person
who is the investor, who

00:25:57.890 --> 00:25:59.760
gives some amount of money.

00:25:59.760 --> 00:26:02.300
And so let me just--

00:26:02.300 --> 00:26:04.650
OK, where's the video?

00:26:04.650 --> 00:26:07.390
There's supposed to be a video.

00:26:07.390 --> 00:26:08.080
Oh, here.

00:26:08.080 --> 00:26:09.768
Sorry.

00:26:09.768 --> 00:26:10.938
All right.

00:26:10.938 --> 00:26:12.980
So they call it an investment
game, a trust game.

00:26:12.980 --> 00:26:17.000
There's the investor, and
there's the responder.

00:26:17.000 --> 00:26:19.550
The investor-- why
is this so slow?

00:26:27.190 --> 00:26:27.730
OK.

00:26:27.730 --> 00:26:30.340
So the investor
and the responder

00:26:30.340 --> 00:26:33.400
have some amount of money, which
is a little bit contrived here.

00:26:33.400 --> 00:26:35.620
But anyway, let's
assume that's true.

00:26:35.620 --> 00:26:37.480
The investor chooses
how much to send.

00:26:37.480 --> 00:26:38.890
This is the investment.

00:26:38.890 --> 00:26:42.730
The responder gets the
investment plus a multiplier.

00:26:42.730 --> 00:26:47.530
The multiplier here is
usually two or three.

00:26:47.530 --> 00:26:50.500
And then the responder gets
essentially the investment

00:26:50.500 --> 00:26:52.810
plus the multiplier
and then can decide

00:26:52.810 --> 00:26:56.030
to respond and send money back.

00:26:56.030 --> 00:26:56.530
OK?

00:26:59.362 --> 00:27:01.320
So in our case, I guess
this is a little tricky

00:27:01.320 --> 00:27:02.490
to do with candy.

00:27:02.490 --> 00:27:07.200
But suppose the investor
has 10 to start with.

00:27:07.200 --> 00:27:09.570
You can now decide out of
the 10 how much you're going

00:27:09.570 --> 00:27:11.570
to give to the other person.

00:27:11.570 --> 00:27:12.932
That is multiplied by 3.

00:27:12.932 --> 00:27:14.640
I need to make sure
we have enough candy.

00:27:14.640 --> 00:27:15.750
I think I do.

00:27:15.750 --> 00:27:17.100
That is multiplied by 3.

00:27:17.100 --> 00:27:20.460
And then the other person
can decide to send some back.

00:27:20.460 --> 00:27:23.120
OK?

00:27:23.120 --> 00:27:26.330
And so you get the issue that
essentially, on the one hand,

00:27:26.330 --> 00:27:31.520
you want to send a lot, to get
the other person to have a lot

00:27:31.520 --> 00:27:32.893
to be able to send you back.

00:27:32.893 --> 00:27:35.060
But of course, it could
also be that you send a lot,

00:27:35.060 --> 00:27:37.018
and the other person
says, thank you very much,

00:27:37.018 --> 00:27:39.000
and doesn't send you anything.

00:27:39.000 --> 00:27:39.500
OK?

00:27:48.530 --> 00:27:50.240
OK, so this is
without communication.

00:27:50.240 --> 00:27:53.350
And we'll do one with
communication after that.

00:27:53.350 --> 00:27:57.087
And why don't you take these two
and divide in those fractions

00:27:57.087 --> 00:27:57.670
that you have.

00:27:57.670 --> 00:27:59.170
How about this?

00:27:59.170 --> 00:28:02.680
So usually, this would be
obviously with real numbers,

00:28:02.680 --> 00:28:03.816
done properly.

00:28:03.816 --> 00:28:04.730
AUDIENCE: Oh, three?

00:28:04.730 --> 00:28:05.830
PROFESSOR: No, no,
just divide it.

00:28:05.830 --> 00:28:06.970
I think roughly half is fine.

00:28:06.970 --> 00:28:08.387
AUDIENCE: Thank
you, [INAUDIBLE]..

00:28:10.963 --> 00:28:12.380
PROFESSOR: Sorry,
this is a little

00:28:12.380 --> 00:28:15.180
tricky with these numbers.

00:28:15.180 --> 00:28:16.270
AUDIENCE: OK.

00:28:16.270 --> 00:28:17.320
[INAUDIBLE]?

00:28:17.320 --> 00:28:17.660
PROFESSOR: No, no, no.

00:28:17.660 --> 00:28:18.695
Then we will use
this for the next.

00:28:18.695 --> 00:28:18.920
I'll get these.

00:28:18.920 --> 00:28:19.760
AUDIENCE: You can
do the next one.

00:28:19.760 --> 00:28:20.385
PROFESSOR: Yes.

00:28:20.385 --> 00:28:22.400
[LAUGHTER]

00:28:22.400 --> 00:28:24.930
All right, so we can do the
same thing with communication.

00:28:24.930 --> 00:28:29.480
So now you can essentially,
before the first person makes

00:28:29.480 --> 00:28:33.140
their first choice or where
before, when the person is

00:28:33.140 --> 00:28:35.990
making the response choice,
you can communicate and talk

00:28:35.990 --> 00:28:41.390
about what you might do in the
future, which may or may not

00:28:41.390 --> 00:28:42.980
be the truth, of course.

00:28:46.130 --> 00:28:48.590
We have Jodi and Sarah.

00:28:59.929 --> 00:29:00.915
AUDIENCE: [INAUDIBLE]

00:29:00.915 --> 00:29:02.400
PROFESSOR: Hi.

00:29:02.400 --> 00:29:05.876
What did you give and receive?

00:29:05.876 --> 00:29:09.207
AUDIENCE: She gave me all of
it, and I gave half of it.

00:29:09.207 --> 00:29:11.540
PROFESSOR: So that's, in some
sense, the ideal scenario,

00:29:11.540 --> 00:29:14.750
because the other person
had a lot of faith

00:29:14.750 --> 00:29:17.210
in their classmate,
perhaps because it's

00:29:17.210 --> 00:29:19.040
in public, because
perhaps because they

00:29:19.040 --> 00:29:21.270
think their classmates
are really nice.

00:29:21.270 --> 00:29:23.690
And so you gave a
lot to start with.

00:29:23.690 --> 00:29:26.360
And then so that was
multiplied, and then

00:29:26.360 --> 00:29:29.270
you actually got a lot
back, which doesn't always

00:29:29.270 --> 00:29:30.930
happen either.

00:29:30.930 --> 00:29:33.740
So I think you could
just, whatever this number

00:29:33.740 --> 00:29:37.850
is, and divide it according
to the actual division of what

00:29:37.850 --> 00:29:39.750
it is.

00:29:39.750 --> 00:29:41.340
So now we're done
with those games.

00:29:41.340 --> 00:29:43.090
What I'd like you to
do is-- so next time,

00:29:43.090 --> 00:29:45.440
we're going to discuss in
detail each of these games.

00:29:45.440 --> 00:29:48.200
And if you want more
rigorous research

00:29:48.200 --> 00:29:50.330
in a sense of rigorous
versions of this research,

00:29:50.330 --> 00:29:53.180
and trying to understand,
when you do this a bit

00:29:53.180 --> 00:29:55.610
more carefully, in terms
of, experimental economists

00:29:55.610 --> 00:29:57.620
are extremely careful
in their procedures

00:29:57.620 --> 00:30:00.680
and in their ways in which
they present information,

00:30:00.680 --> 00:30:01.890
and so on and so forth.

00:30:01.890 --> 00:30:04.130
So what we just were
doing was pretty sloppy

00:30:04.130 --> 00:30:06.435
by those standards.

00:30:06.435 --> 00:30:08.060
So what can we learn
from this research

00:30:08.060 --> 00:30:09.480
that does it very carefully?

00:30:09.480 --> 00:30:12.200
And what does it predict, when
you think about, OK, these lab

00:30:12.200 --> 00:30:14.465
games, in some sense,
they are fairly contrived,

00:30:14.465 --> 00:30:15.590
what can we learn actually?

00:30:15.590 --> 00:30:17.900
Are they predictive of
real world behaviors?

00:30:17.900 --> 00:30:19.880
If you have any
observations about things

00:30:19.880 --> 00:30:22.172
that you have learned or
thought that were interesting,

00:30:22.172 --> 00:30:25.100
and so on, feel free to
share them on the forum,

00:30:25.100 --> 00:30:26.378
anonymously, if you like.

00:30:26.378 --> 00:30:27.920
And I can discuss
some of the things.

00:30:27.920 --> 00:30:30.620
This could be either anecdotes
about messages you received

00:30:30.620 --> 00:30:32.270
or things that happened.

00:30:32.270 --> 00:30:35.670
I can then look at these and
share them with the class.

00:30:35.670 --> 00:30:37.280
Otherwise, I'll
see you on Monday.

00:30:37.280 --> 00:30:40.630
[CLASSROOM CHATTER]