101-24_07 - Econ 101 Lecture 24 Communication Between...

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Econ 101 Lecture 24 Communication Between Potential Adversaries When a toad and his rival vie for the same mate, each faces an important strategic decision. Should he fight for her or set off in search of another? To fight is to risk injury. But to continue searching has costs as well. At the very least, it will consume time. And there is no guarantee that the next potential mate will not herself be the object of some other toad's affections. In deciding between these alternatives, each toad's assessment of the other's fighting capabilities plays an important role. If one's rival is considerably larger, the likelihood of prevailing will be low, and the likelihood of injury high, so it will be prudent to continue searching. Otherwise, it may pay to fight. Many of these decisions must be made at night, when it is hard to see. Toads have therefore found it expedient to rely on various nonvisual clues. The most reliable of these turns out to be the pitch of the rival's croak. In general, the larger a toad is, the longer and thicker are its vocal cords, and hence the deeper its croak. Hearing a deep croak in the night, a toad may reasonably infer that a big toad made it. Indeed, experiments have shown that the common toad is much more likely to be intimidated by a deep croak than a high-pitched one. The seller, for example, sometimes has an incentive to overstate the quality of his product. The buyer, likewise, often has an incentive to understate the amount she is willing to pay for it. And the potential employee may be tempted to misrepresent his qualifications for the job. Bridge partners, by contrast, clearly share common goals. When a bridge player uses the standard bidding conventions to tell his partner something, there is no reason for his partner not to take the message at face value. Neither player has anything to gain by deceiving the other. Communication here is a pure problem of information transfer. A message need only be decipherable. Error aside, its credibility is not in question. A very different logic applies, however, when the interests of would-be communicators are in conflict, or even potentially so. Suppose, for example, the bridge player whispers to the opponent on her left, "I always bid conservatively." What is the opponent to make of such a remark? It is perfectly intelligible. Yet, if all parties are believed to be rational, the relationship between them is such that the statement can convey no real information. If being known as a conservative bidder would be an advantage, that would be reason enough for a player to call himself one, true or not. The statement is neither credible nor incredible. It simply contains no information. Example 24.1
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101-24_07 - Econ 101 Lecture 24 Communication Between...

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