Traveler’s dilemma

The traveler’s dilemma (sometimes abbreviated TD) is a type of non-zero-sum game in which two players attempt to maximize their own payoff, without any concern for the other player’s payoff. The TD was formulated in 1994 by Kaushik Basu in this form:

“*An airline loses two suitcases belonging to two different travelers. Both suitcases happen to be identical and contain identical antiques. An airline manager tasked to settle the claims of both travelers explains that the airline is liable for a maximum of $100 per suitcase-he is unable to find out directly the price of the antiques.

To determine an honest appraised value of the antiques, the manager separates both travelers so they can’t confer, and asks them to write down the amount of their value at no less than $2 and no larger than $100. He also tells them that if both write down the same number, he will treat that number as the true dollar value of both suitcases and reimburse both travelers that amount. However, if one writes down a smaller number than the other, this smaller number will be taken as the true dollar value, and both travelers will receive that amount along with a bonus/malus: $2 extra will be paid to the traveler who wrote down the lower value and a $2 deduction will be taken from the person who wrote down the higher amount. The challenge is: what strategy should both travelers follow to decide the value they should write down?*”

It is a symmetric game in which we have an optimum choice of $100 and a Nash equilibrium of $2. It could be understood as an extension of Prisoner’s dilemma.

See also

Game Theory, Prisoner’s dilemma, Social dilemma

Material

• Kaushik Basu,The Traveler’s Dilemma; Scientific American Magazine, June 2007

Papers

• Kaushik Basu, The Traveler’s Dilemma: Paradoxes of Rationality in Game Theory; American Economic Review, Vol. 84, No. 2, pp. 391-395; May 1994.