May

27

 The Traveler's Dilemma and Prisoner's Dilemma are two examples of cooperative-competitive games. They contain aspects of reward for cooperative behavior and rewards for competitive behavior. In the Traveler's Dilemma game picking a higher number is cooperative play. The player is maximizing the reward to the two-player community. Picking the low Nash Equilibrium is competitive play. The player is maximizing the minimum reward. Naturally as the reward for competitive play increases the number of actual players using competitive strategies increases as well.

There is a strong parallel to the market. If we all buy stocks with all of our money they will go up. The community of investors will all gain. But human nature being what it is we will always be at least somewhat fearful that someone else will sell first and we will be the last to get out. Thus based on a news event or even non-news some will choose the competitive choice to get out early. They seek to avoid the maximum risk of a putative future decline by getting out before the other guy. However the long-term drift strongly indicates that such anti-cooperative behavior is self-defeating and leads to opportunity loss.


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