Paging John Nash
 

John Nash was the economist who won the Nobel Memorial Prize in economics for his research in game theory. Game theory addresses situations where collusion is not possible, and where each participant gains individually by undertaking behavior that harms the other participants, but all participants gain by engaging in "socially useful" behavior.

The classic case is the Prisoner's Dilemma. Two accomplices in a crime are interrogated separately. If both confess they will each get 5 years. If neither confesses, both will get one year. If one confesses and the other does not, the confessor will go free and the other will get 10 years. You can see that each is individually better off confessing regardless of what the other does, but together they are better off remaining silent.

In many cases where a deal opens up, each person using it will have only a slight incremental impact on the likelihood of it being closed, so they would gain by taking maximum advantage. Yet if everyone abuses it, it will be closed that much more quickly.

Any experts on game theory out there to figure out the solution to this? (And you all thought that obscure branches of economics weren't meaningful to your everyday lives.)

Of course this is a game with both multiple equilibria and uncertainty. You cannot leave out the scenarios where deals have been honored because of the large number of people that have been affected.

There also is the opportunity for collusion and communication among the players, so it isn't a direct fit for the prisoner's dilemma, is it? Also the "reward" in these case may be honored because of so many people getting in on it, or the exact opposite may occur. Sometimes it's a true mistake rate/fare. Other times people are playing by the company's published rules until the company decides it's costing them more than they wanted, and renegs on the deal (proactively or retroactively). Then there are gray areas due to fuzzy T&Cs, etc. The particular company involved can make a difference, too.

I would be inclined to argue instead that this is Kobayashi Maru (https://en.wikipedia.org/wiki/Kobayashi_Maru)...but for whom is the interesting question :-)

Another reason this is different than the prisoners dilemma is that there are lots of prisoners and with some colluding and some not. Also, some make rational decisions and some don't.

For example, the prepaid card situation may persist due to the raw number of people who use them, paying in cash, and generating a lot of fees per dollar loaded.

Maybe. But I think it's abundantly clear that the more attention these things get - from the blogs, from people posting enthusiastically here on FT - the sooner that steps will be taken to kill the deal for those of us who are playing for miles & points.

That is, cards like VRs won't ever go away completely, but it will become impossible to buy them with a credit card. We've seen this pattern over and over, whether VRs at Office Depot, variable-load cards at Office Depot (both dropped entirely there after lots of attention and a gold-rush mentality), or a switch to a forced cash-only policy via cash register reprogramming at many CVS and Walgreens (this seems to still be in progress in some areas but surely will end soon everywhere) - again, after wide exposure on blogs and FT and a rush by everyone looking for the next exploit.

The attention and exposure surely kills all deals at some point. The products don't go away - you can still get Vanilla Reloads with cash at many outlets - but for those who are looking to play the miles and points game, the deals die.

The more you talk about them openly, the sooner they die. Bloggers and the corporate owners of FlyerTalk don't care about deals getting killed - in fact, both directly benefit from the maximum exposure possible, so they're actually working against the interests of those who would like to benefit from the game. A tough situation.

Well said.

It took you two years to agree with nwflyboy? ;-)

No, it is not abundantly clear. It is only a supposition and an assumption. No actual proof.

That a child can't swim is not proof that it will drown in water over its head.

But we still don't toss children who can't swim in the deep end of the pool.

I'm not disagreeing that this seems to be the pattern, but I guess it's not abundantly clear to my why this is happening. I'm always perplexed when many of these things "die," especially in the last couple of years after most of these players have had some sort of experience with this game.

Certainly when these products are introduced there must be some discussion within the companies involved of the transaction/administration costs, including credit card fees, that need to be absorbed when these products are purchased. It just seems like pure insanity that this is a complete afterthought months after a product has been on the market.

If this is the case, I don't understand why publicity and increased gaming of the system for miles leads to their demise. Don't they introduce these products with the hope of mass widespread use? The transaction fees for the product issuers and retailers doesn't increase on a per product basis as a result of more people buying them (if anything it should be going down). The only group this seems to cost is the credit card companies who's miles/rebate cards are being used, and for the most part it's not this group shutting down the system. And even for them, I only see the increased ability to churn for sign-up/category bonuses being some unexpected cost (a $ charged is a $ charged regardless of what it was on).

Given the above, I can only assume either 1) these players really are stupid and don't think about all the costs involved when they introduce these products, in which case I think "shutdown" is inevitable as the impact on the bottom line will eventually be seen, publicity or not; or 2) something about the increased activity/use makes some of the players nervous (perhaps due to money laundering concerns) or they just don't ideologically like the idea of using their products for personal gain.

What am I missing?

what you're missing is that people are stupid and selfish... they despise FT and the blogs, yet are the first ones on all those places to soak up as much knowledge for themselves first... some folks here *think* that they're thinking long term by being gung ho, but they're leading to their own demise.

why? cause closed loop systems dont work. look at history, name one closed-off society that has ever prospered long-term. it hasnt, it dies out. every form of xenophobia is a dangerous thing. which is precisely what some of the geniuses here advocate.

Really bad analogy.

Bald assertions do not constitute a valid argument.

I don't see it as a no-win situation, but a test of character? Perhaps, for some. I am a relative noob and cannot speak for others here, but I suspect the persistent MS'er is probably more like Kirk, re-programming their routine/opportunities precisely because they do not believe in "no win" scenarios.