Not long ago, Nobel Prize winner Robert Aumann presented an interesting scenario dealing with the mathematical concept of Gaming Theory and how it sometimes applies to real-life negotiations. Here it is:
Reuben and Simon are placed into a small room with a suitcase containing $100,000 of cash. The owner of the suitcase offers them the following: "I'll give you all the money in the suitcase, but only on the condition that you negotiate and reach an amicable agreement on its division. That's the only way I will give you the money. "
Reuben, who is a rational person, appreciates the golden opportunity presented to him and turns to Simon with the obvious suggestion: "Come, you take half the amount, I'll take the other half, and each of us will go away with $50,000." To his surprise, Simon, with a serious look on his face and a determined voice says: "Listen, I do not know what your intentions are with the money, but I'm not leaving this room with less than $90,000. Take it or leave it. I'm fully prepared to go home with nothing."
Reuben can not believe his ears. What happened to Simon? he thinks to himself. Why should he get 90%, and I only 10%? He decides to try to talk to Simon. "Come, be reasonable," he pleads. "We're both in this together, and we both want the money. Come let's share the amount equally and we'll both come out ahead."
But the reasoned explanation of his friend does not seem to register on Simon. He listens attentively to Reuben's words, but then declares even more emphatically, "There is nothing to discuss. 90-10 or nothing, that's my final offer!" Reuben's face turns red with anger. He wants to smack Simon across his face, but soon reconsiders. He realizes that Simon is determined to leave with the majority of the money, and that the only way for him to leave the room with any money is to surrender to Simon's blackmail. He straightens his clothes, pulls out a wad of bills from the suitcase in the amount of $10,000, shakes hands with Simon and leaves the room looking forlorn.
This case in Game Theory is called the "Blackmailer Paradox." The paradox emerging from this case is that the rational Reuben is eventually forced to act clearly irrationally, in order to gain the maximum available to him. The logic behind this bizarre result is that Simon broadcast total faith and confidence in his excessive demands, and he is able to convince Reuben to yield to his blackmail in order for him to receive the minimum benefit.
Can you think of a way to rationally thwart this paradox, so that sanity can prevail? Can you think of anywhere this paradox may be on display on the international or domestic scene?
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