Thought Experiment


Okay, okay.  For a second, close your eyes and follow along.

Wait.

Doesn’t work in this medium.

Read this and THEN close your eyes and think through the scenarios.

Or whatever.

Consider dinner.  Fine dining at a fancy schmancy restaurant.

Over the course there will be 1000 people served.  They can come in tables of 2 or or 4.  1 or more even.  Doesn’t matter.  Now, consider these two scenarios:

  1. The price of dinner will be carried by the individual.  That is, when the meal is over, the waiter will bring the check.  One check for each individual.
  2. The price of dinner will be carried by the group.  That is, when the meal is over, the waiter will charge the account.  When all 1000 people have eaten, the total bill will be divided by 1000 and each person will recieve a bill in the mail.

These two methods of payment are going to cover the cost of the whole experience.  Appetizers, desserts, cocktails and even valet parking – heck, coat check too.

Now, here is the question:

Under which scenario would you expect the restaurant to sell more desserts in?

How about appetizers?

For extra credit, explain your answer.

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6 comments
  1. Nice question.

    Obviously, the restaurant will sell more of everything in the second scenario. Explanation: If you will be paying for the exact meal you ordered, the full cost of everything is directly on you. This situation makes the individual fully accountable for his meal time actions. In the second scenario, the individual is not fully accountable for his actions. Additional items you order will not cost you as much as the price on the menu as it will be divided by 1000. Keeping the other 999 people’s meals constant, you will pay only 10 cent difference between ordering nothing and spending 100 dollars. Essentially, you get a hundred dollar meal for 10 cents. The problem this creates is that all 1000 people have an incentive to consume more (or more expensive) items as their logic is the same. Therefore, the bill for the collective meal will be much higher.

    I prefer separate checks.

    • pino said:

      Obviously, the restaurant will sell more of everything in the second scenario.

      Exactly.

      In fact, this concept applies to any product or service that people care to buy or sell. Given a resource with alternative means, people will over consume if the burden of the cost is not 100% directed at the consumer.

      Why that would not apply to medical care is beyond me.

      • Pino,

        This is a classic case of game theory. The second scenario is an example of a prisoners dilemma where the optimal strategy is to defect.

        Think of it this way. You have two prisoners, who cannot speak to one another. If they both keep their mouths shut, the punishment is 5 years each.

        If one defects, he gets no punishment while the other prisoner gets 10 years.

        If they both cooperate and confess, they each get 3 years.

        The dominant strategy is to defect since no matter wha the other guy does, the defector gets 0 or 3 years. If he remains silent, he gets 5 or 10 years.

        The same principle applies to the second case of your example.

      • pino said:

        This is a classic case of game theory.

        The remarkable thing? People get it.

        They ‘prolly can’t explain it in terms of game theory [speaking of games : Game of Thrones – Damn] but they get the application.

        Everyone gets an appetizer. And dessert.

      • “Everyone gets an appetizer. And dessert.”

        And why wouldn’t they?

        If I know I am going to have to pay for Birtha’s cake I might as well eat cake too. 😉

        This stuff gets really interesting when you apply it to nuclear deterence theory…but I digress…

      • pino said:

        And why wouldn’t they?

        In the end, it’s the fallacy of the left. People CAN make rational decisions based on their self interests.

        The ones that can’t, the outliers–we’ll help them to be sure. But the vast majority of people are fully capable adults.

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