Denis Leclerc on the Prisoner’s Dilemma

By: Keith Blincoe, Staff Writer

Today I spoke with Dr. Denis Leclerc. Topmost on my mind was an exercise from his class in which the class collectively bargains on final-exam scores. Some explanation is in order: each student votes “compete” or “cooperate”; choose the former and 25 points more than anyone who chooses the latter; choose “cooperate” and get 87 * P, where P is the percentage of voters who also voted “cooperate.” So if everyone votes “cooperate,” then everyone would get 87 points. There are six rounds of voting. What’s special about the number 87? Dr. Leclerc arbitrarily dictates that anyone whose average per-round score is 87 or higher will get a guaranteed score of 87 on the final exam—even without taking it. (87 would mean a B+.) The game has inspired lively discussion, and moderate acrimony, among the students in the class.

Dr. Leclerc and I began with game theory.

Das Tor: Would a formal study of game theory be helpful to negotiation?

Denis Leclerc: Yes. If you want to know more about game theory, Yale has an online course. It’s kind of a boring format—the guy has a chalkboard, and it’s very dry. He comes from a mathematical background. I used to watch it when I was driving, but I of course had to stop that.

There are very few business institutions that I know of that do game theory. I don’t know if W.P. Carrey does something on game theory. It’s a very interesting field. If I recall properly, the field started in World War II when they wanted to see if they could anticipate others’ behavior.

This exercise [the final exam game] is the classic game theory exercise. At the core, it’s the prisoner’s dilemma. You can vary it according to the time and the number of votes.

Consider the example of Swiss cheese makers. They had a price-fixing scheme going on. Nobody maximized their potential profit, but everyone did above [industry] average. A great example of a mismanaged prisoner’s dilemma is the airline industry. They went from cooperating with each other—in the airline industry, there was a destruction of the price structure. In order to win now they have to charge customers for everything. The ticket price doesn’t mean anything. Passengers just go for the cheapest price and when they get there they find they have to pay for their bag. You want a blanket? That’s $7.

DT: This is like Ryanair.

DL: Yeah. Plus, with Ryanair, you’re not going to fly to the major airports. You’re going to have to take the bus. This is an example of a pure price war. I’m not an economist, but you have to look at other things. You can’t only think about price. Like JetBlue. And they’re starting to wake up. But did you realize that you get different online quotes depending on whether you’re using a PC or a Mac?

DT: I think I remember hearing that. How many times have you played the game? Where did you get the idea?

DL: Ha! I stopped counting. I started in 2004 or 2005. I would say four times a year at least. To me the most interesting group is the executive EMBAs.

They go through a lot more conflicts than the MBAs. It depends on how they align. Some of them just don’t want to take a final exam. And some of them are just like, “I want to see what happens.” They’re much more vocal about the disagreements they have in class. It’s real life for them. This happens to them all the time.

The last time, I thought it was going to destroy the entire EMBA class. One guy competed. And he competed on the last round. I asked him, “Are you sure?” and he said, “Yeah, I just want to see what happens. And I want people to remember that they have not made the case that I should cooperate from cognitive and behavioral approach. We just rely on the goodness of people’s hearts.”

DT: Has any class ever succeeded in 100% cooperation?

DL: Yeah, it happens. The smaller the class, the more successful they are. They don’t see the point in competing, so very quickly everyone aligns. I have a whole database about the behavior of classes. And the classes that do better are in the spring semester. I think it’s because they’re so sick of classes. They look at the chance to not have to take a final exam and they just say, I don’t want to have an exam.

It’s very rare that we have win-win in real life, in business. But I’m actually stunned that your class has been able to cooperate—for one simple factor.

DT: We have a lot of people.

DL: Yes. I’m absolutely stunned. My afternoon class has only 21 students.

There are a couple things you can do lower the potential for defection, and that’s something I’ll go over during the debrief. You can do it at the behavioral or the cognitive level. Most people jump the instinctive way. “We will hunt you down. We will find you.”

DT: We did that.

DL: Yeah. It’s absolutely human.

DT: But it’s an empty threat if it’s online voting.

DL: Yes. I find that the people who compete are not the ones you expect. It’s not the person who is brash and says I’m going to compete. It’s something in the middle. It’s about the likelihood of getting caught. A colleague was teaching online and had to cancel the whole exercise. It had turned into a vicious—people can really trash each other online.

And [this cognitive/behavioral distinction] is a difference between Americans and people from other countries. Americans negotiate on the cognitive level. They try to influence, not just coerce. It’s supposed to be persuasive. And they’re good at it. That’s why Cuba is such a problem. America tried the behavioral approach, and it just isn’t working. Look at how many years the same guy has been there, and how many U.S. presidents have gone by.

A movie that showed the prisoner’s dilemma is 13 Days. Every day is another issue. And they try different approaches. You know, like, “Today we’ll try a cooperative approach.” And each day they flip to different approach. They just go through all of them. We could watch that in our class!

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