Suppose you're part of a game with a large, unknown number of players, and each player is given 100 coins of equal value to start. Here's how the game works: each round, all players anonymously put an undisclosed amount of coins -- up to 20 -- into the central pot. Once each player has done this, all players are returned the average amount of coins put into the pot (total coins divided by number of players) plus 25% of that average. The game continues for 5 rounds.
How many coins would you put into the pot each round, and why?
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Edited by FoMan123: 1/14/2013 7:56:03 PMI love game theory. Much like the prisoner's dilemma, this works out best for everybody if everyone trusts everyone else to cooperate. And thus this works out in an ideal world if everyone puts the maximum amount of coins in the pot each round. In that case, the group profits at the maximum level. The selfish player, of course, will put the minimum amount of coins in and will gain the most individual profit. If enough players are selfish, the players who put the most coins into the pot will suffer a loss, not a profit, while the selfish players will enjoy a profit at others' expense. If ALL the players are selfish, nobody will profit at all. Therefore, like most theoretical games, my answer would depend on who else I know is playing. With a large, unknown number of (apparently anonymous) players, most rational, logical people -- including me, personally -- would put in the minimum amount of coins to reduce the personal risk and maximize the potential profit. This particular hypothetical effectively demonstrates why taxes are mandatory :-D