# The Beauty Contest

Document Sample

```					The Beauty Contest

Discussion
Mental Models
 Model 1: More is better (n = 6)
 Everyone chooses 100, therefore, choose 66
 Model 2: People are Robots (n = 9)
 Everyone chooses at random, therefore choose 2/3 of
50
 Model 3: People are best responding to robots (n =
13)
   Everyone thinks others are robots, therefore average =
2/3 of 50; hence I should choose 2/3 x 2/3 x 50
 Model 4: People are very smart (n = 20)
 Everyone sorts this process out and chooses a really
low number.
 Model 5: Lucky numbers, palmistry, etc. (n = 8)
Actual Distribution
.08
.06

Average = 22
Density

.04

Winner = 15
.02
0

0   20   40            60   80   100
Choice
Take Aways
 A “recipe” for strategy
1. Construct a mental model of rivals
2. Determine “best response” to mental model
3. Reality check: Given my calculations, is my
mental model likely to be correct?
1.   How sensitive is my strategy to the mental
model?
2.   How wrong can I afford to be in my
assessments without changing my strategy?

```
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
 views: 2 posted: 10/24/2012 language: simple pages: 4