Game Theory, Diner’s Dilemma and Welfare Schemes of Government

Treat each federal dollar as if it was hard earned; it was – by a taxpayer.

–          Donald Rumsfeld

In Game theory there is interesting game called as Diner’s Dilemma.Diner’s Dilemma is a game-theory situation with several players. A diner’s dilemma occurs when several participants attempt to obtain the highest possible personal reward, but instead find themselves in an unfavourable situation.

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If five friends were asked to go to a restaurant individually and pay their own bill, they will eat dishes that are cheaper. Now if all of them decide to go to restaurant together and agree to split the bill before ordering dishes, assumption here is per head cost will be lower than what they would have paid had they gone alone. This is where Diner’s Dilemma sets in. Each one of them thinks that since bill will be split i.e. cost will get distributed between other members, he/she will order an expensive dish, so everyone ends up ordering dishes more expensive than what he/she would normally buy,  and end up spending more money i.e. they all end up facing the outcome they tried to avoid- a more expensive meal.

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There is one more variation of this game; if the same group was told that bill will be paid by someone else, the group will eat more than what they would eat normally and order most expensive dishes.

Our government, which believes in social welfare, can learn lot from this esp. the way it wastes tax payer’s money on several social welfare schemes. As long as people pay for services they use, they will use it reasonably, but once politicians decide to subsidise or distribute free of cost services like water, electricity, fuel, fertilizers etc., consumption will go up, wastage will increase and tax payer will end up paying even more.

waste money

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