Economists never tire of proclaiming that “incentives matter.” The statement is trite, but the underlying truth of economics which it reflects is important: behavior often changes when the perceived costs and benefits of action change.
In the last few weeks, this has been amusingly and eloquently demonstrated at a local trivia night I attend. The old bar which used to host weekly trivia closed, so our team relocated to a new venue. Here, trivia is run by the same people and the same teams compete every week. The only differences are the rules of the game (we might say that the institution which creates the incentives has changed). Two rules in particular inspired interesting behavior.
The first is quite simple. In the old bar, the team names were the same for months, even years at a time, because there was little motivation to change. The names, most of which should not be repeated in mixed company (or in any company for that matter) tend to revolve around puns and wordplay, and it is often difficult to invent clever new ones. So when you have a good name, you don’t really have much motivation to change it.
The new bar however has a special rule: every week, the team with the most creative and original name wins a free pitcher of beer. The result is not surprising: whereas before teams prided themselves on keeping a winning name over a long period of time, now there has been an instantaneous and complete change. Every team has a new name every week, and a vigorous competition has ensued over the weekly pitcher. A little motivation goes a long way: the monetary value of the beer is only about $5, as compared to the personal value of a team tradition and the mental effort of coming up with a new name. But apparently such concerns disappear with the possibility of a free drink.
The second new rule is that the team finishing with the lowest score at the end of the night receives a free round of shots of their choice. This is where things get really interesting. Consider the incentive: if, going into the later rounds, your team has little chance of placing among the top three (the prize winners), the incentive is for the team to play as poorly as possible, because last place is the only other remunerative option. The key is to not be one of the mediocre teams, who receive nothing.
In this case it is more difficult to tell whether behavior is actually changing, but there have been some promising signs. Several teams show up midway through the game, when it is impossible to finish in the top three. They simply play as well as they can from this point, possibly reasoning that they cannot do better than the teams who have been around for the duration of the game. This way they don’t have to intentionally answer incorrectly, and can be successful but lose at the same time. Similarly, some teams begin the game, leave during the middle rounds, and return at the end, ensuring their score remains low. In any case, there does seem to be a sort of race-to-the-bottom competition involved, which makes sense given that the round of shots has a monetary value of around $30, which is at least as great as the monetary rewards for winning (sometimes greater). Strategic behavior is indicated by the fact that halfway through the game, the point distribution tends to be fairly even, because most teams make an effort until they really feel as if their chances of winning are small. By the end of the game however, the spread has widened considerably, with clusters of teams at the top and bottom, but relatively few in between. This is a significant change from the old distribution, where the cluster of scores tended to be in the mediocre range at the end of the game, as could be reasonably expected if everyone is really trying.
Ultimately, the simple lesson is that when incentives change, people find certain actions more attractive than before, and they pursue those actions. It should come as no surprise to economists that necessity is the mother of invention. And, at least among the trivia crowd, alcohol is most certainly a necessity.
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Isn’t this just basic game theory?
it’s actually quite a profound truth about us (in fact, about life – living things)
it explains why laws lead to people finding loopholes
it also reiterates the beauty of the human mind – how exquisitely evolved it is for dealing with changes to environment
http://thepeakoilpoet.blogspot.com/2011/07/maim-chaim.html
Interesting example, if too easily dismissed.
“the simple lesson is that when incentives change, people find certain actions more attractive than before, and they pursue those actions”.
Dang! If only I’d studied economics at university!! What marvels you learn.
a pitcher of beer for $5? wtf
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