Presenter: Nipun Agarwal Is it better to be selfish or altruistic in 2-Person everyday human interactions? Presenter: Nipun Agarwal 15th International Conference in Computing in Economics and Finance Wednesday 15th July 2009 (14:00 – 15:40 hrs) Session 12: B6

Introduction Introduction What is 2-person human interaction? In our everyday interactions we meet people at random, who we might have never met before in our lives. For example, you take the train to work every morning, even if you take exactly the same train from the same station every morning. I am sure you will come across people you have never met before in your life every single day. The 2-person Human Interaction model is not a model to analyse competition, but to analyse human interaction and find out if the Selfish or the Altruistic behaviour trait is more dominate in such interactions - Is it better to be selfish or altruistic in 2-Person everyday human interactions? The 2-person Human Interaction model is a 2-person Prisoner’s Dilemma model where people are chosen at random with random levels of selfishness and altruistic traits. Each individual obtains its utility based on its level of Selfish/Altruistic trait. The population evolves, with the bottom 10% based on lowest utility eliminated at the end of each game and replaced with new individuals with random Selfish/Altruistic traits.

Presentation Structure This presentation is structured in the following way: Introduction Background to this Discussion Discuss the Model Analyze the Results Future Research Directions

Background Background to this Discussion Adam Smith talked about Self-Interest in his book the Wealth of Nations (1776) and about Altruism in the Theory of Moral Sentiments (1759). Margolis (1982) believes that there is no difference between self-interest and selfishness. Some of the recent models that relate to this research are provided by Bowles and Gintis (2000), Gintis et al (2008) and Eldakar and Wilson (2008), who discuss the concept of Strong Reciprocity. Strong reciprocity in general relates to a behaviour of reciprocating by punishing the selfish individuals within a group. Both these ideas of Selfishness and Altruism have been researched extensively in economics, specifically in game theory. Economists have in general worked with N-person games because 2-person games are meant to be too simplistic. There appears to be a gap in analyzing 2-person interactions where people meet each other at random.

Discuss The Model Reviewing the 2-person human interaction Model The 2-person Human Interaction Model is as follows: A pool of 1,000 individuals are chosen at random from a pool of N individuals and the level of Selfishness (Level of Altruism equals 1 – Level of Selfishness ) is assigned to them at random between the value of 0 – 1 Humans have varying degrees of Altruism and Selfishness that equals 1 100,000 rounds are run in each game and a total of 1,000 games are run per experiment Selfish individuals get half of the return on the Common Pool investment plus the return on the selfish investment Altruistic individuals only get half the return on the Common Pool investment A Cost of Competition exists for destructive competition (i.e. when two selfish individuals meet each other) Two individuals are chosen at random to play each round and their Utility is calculated based on their Level of Selfishness At the end of each round the two players are thrown back into the pool of 1,000 players and two new players are picked out of the pool for the next round Utility is reset at the end of each game and the bottom 10% of players are eliminated after each game being replaced at random by a new set of individuals from the same pool where the initial population was selected

Equations defining the Model Common Good Factor – Return on the Common Pool Investment Discuss The Model Equation to calculate Utility: Where, = Return on the Common Pool = Return on Selfish investment = Cost of Competition = Level of Altruism of Player 1 = Level of Altruism of Player 2 = Level of Selfishness of Player 1 = Level of Selfishness of Player 2 The Common Good Factor (CGfactor) is the rate of return provided on the Common Pool. CGfactor has a value equal to 1 in the standard model to provide constant returns to scale. Both Altruistic and Selfish individuals gain when the Common Good Factor is increased to a level greater than 1. The lowest level of the Common Good Factor equals 0. The Return on the Common Pool investment equals The contribution to the Common Pool by Players 1 & 2 is represented by and .

Selfish Factor – Return on Selfish Investment Cost of Competition Factor – Cost for Destructive Competition Discuss The Model The Selfish Factor (SFfactor) is the rate of return provided on the Selfish investment. The SFfactor has a value equal to 1 in the standard model to provide constant returns to scale. The lowest level of the Selfish Factor equals 0. Guilt is the opposite of the Selfish factor. Guilt in this case represents Adam Smith’s Impartial Spectator. In the Standard 2-person Human Interaction Model: Guilt = 1 – SFfactor When, a Selfish individual feels Guilty, his/her level of Selfish Factor (SFfactor) falls towards zero. The Return on the Selfish investment equals The Cost of Competition Factor (Cfactor) is the cost of destructive competition. The Cfactor has a value equal to 0.25 in the standard model to provide constant returns to scale, with it lowest level equal to 0. The Cost of Competition equals This Cost of Competition comes into effect when two Selfish players meet each other in a round. Selfish individuals compete with each other and reduce each others Utility due to destructive competition.

Analyze The Results Results from the Standard Model Figure 1. Standard 2-Person Human Interaction Model Analyze The Results The results of the 2-person Human Interaction Model are: The number of Selfish players increase in the system overtime The mean level of Utility decreases as Altruistic individuals get eliminated in subsequent games. As, Selfish players use Altruistic players to increase their Utility. Therefore, the elimination of Altruistic players reduces mean Utility in the system Selfishness increases and Mean Utility decreases rapidly within the first 100 games and then both these variables hardly change Selfishness will never go to 1.0 because Altruists will always be part of the game, due to the new Altruists entering the game and due to loss of Utility of Selfish players due to the Cost of Competition

Analyze The Results Increasing Common Good Factor An increasing Common Good Factor (CGfactor) results in: CGfactor = 1.5: Selfishness level fluctuates around 0.50 as Selfishness increases then a higher CGfactor causes Selfishness to fall, though it isn’t sufficient to reduce Selfishness permanently and Selfishness tries to increase again. A negative correlation of 0.997 exists between Selfishness and Utility in this data set. The overall level of Utility is higher than the Standard Model. CGfactor = 2.0: Altruistic players get higher Utility due to higher CGfactor and the level of Selfishness resultantly decreases. A negative correlation of 0.999 exists between Selfishness and Utility in this data set. Mean Utility = 325 at CGfactor = 2.0 compared to SFfactor = 2.0 (i.e. Mean Utility = 292). An increase in the CGfactor is a powerful way of increasing the level of Altruism and Utility in a game. Figure 2. Common Good Factor = 1.5 Figure 3. Common Good Factor = 2.0

Analyze The Results Increasing Selfish Factor An increasing Selfish Factor (SFfactor) results in: SFfactor =1.5: Utility stays constant in subsequent games as the increase in Selfish investment equals the loss of Altruistic individuals. A zero correlation exists between the level of Selfishness and Utility at this level. SFfactor = 2.0: Selfishness increases rapidly in first 100 games (at SFfactor = 2.0) - mean Utility increases with level of Selfishness. A perfectly positive correlation (i.e. positive 1) exists between the level of Selfishness and Utility within these games. Utility at SFfactor = 2.0 (i.e. Mean Utility = 292) is lower compared to CGfactor = 2.0 (i.e. Mean Utility = 325). Increasing the SFfactor can have a positive effect on the level of Selfishness within a game. Figure 4. Selfish Factor = 1.5 Figure 5. Selfish Factor = 2.0

Analyze The Results Level of Selfishness - Cost of Competition The Cost of Competition in the game directly affects the Level of Selfishness as: Cfactor = 0.25 (Base Case): Level of Selfishness increases at a Selfish Factor (SFfactor) level above 0.5. Maximum level of Selfishness is nearly 0.8 at SFfactor = 2.0. Cfactor = 0.00 (No Cost of Competition): Level of Selfishness is high (nearly 0.8) above the Selfish Factor (SFfactor) of 0.2 – similar to when Cfactor = 0.00 Due to lack of cost of destructive competition - Selfishness remains dominant. Figure 6. Cost of Competition Factor = 0.25 (Standard Model) Figure 7. Cost of Competition Factor = 0.00

Analyze The Results Level of Selfishness - Cost of Competition The Cost of Competition in the game directly affects the Level of Selfishness as: Cfactor = 0.50: Level of Selfishness starts to decrease substantially. Players become Selfish only after SFfactor is greater than 0.50. Happens due to the higher cost of destructive competition. Cfactor = 1.00: Level of Selfishness drops radically and is nearly eradicated. Selfishness starts to occur only when the SFfactor is greater than 1.00. An increase in Cfactor to 1.00 has a substantial impact in increasing Altruism and will significantly reduce the level of Selfishness within a game. Figure 8. Cost of Competition Factor = 0.50 Figure 9. Cost of Competition Factor = 1.00

How does Utility change with the Cost of Competition? Analyze The Results The Cost of Competition in the game directly affects the mean Utility: Cfactor = 0.25 (Base Case): Mean Utility increases less (Maximum = 300) in Figure 11 than at Cfactor = 0.00 (Maximum = 390) in Figure 10. A depression in the mesh aligns with the sharp increase in level of Selfishness in figure 7. Mesh is flatter, though mean Utility increases with a higher CGfactor compared to a higher SFfactor. Cfactor = 0.00 (No Cost of Competition): Mean Utility starts at 0.00, later increasing with an increase in the CGfactor and SFfactor. A slight depression in the mesh which matches the sudden increase in the level of Selfishness. Past the depression in the mesh the mean Utility increases due to an increasing SFfactor combined with an increasing level of Selfishness. Figure 10. Cost of Competition Factor = 0.25 (Standard Model) Figure 11. Cost of Competition Factor = 0.00

How does Utility change with the Cost of Competition? Analyze The Results The Cost of Competition in the game directly affects the mean Utility: Cfactor = 0.50: Mean Utility starts to drop further (Compared to Cfactor = 0.00 and 0.25). Though, mean Utility is higher when the CGfactor increases compared to an increase in the SFfactor. Depression in the mesh also becomes more significant and it correlates directly with the increase in the level of Selfishness. Cfactor = 1.00: Mean Utility is nearly half compared to when Cfactor = 0.00. Depression on the mesh has moved to a higher SFfactor level that correlates to the jump in the level of Selfishness. Drop in mean Utility above SFfactor = 1.5 occurs due to the significant increase in the level of Selfishness. But, this an increase in Selfishness is not proportionally recovered from an increase in the SFfactor. Leading to lower Utility for Selfish individuals. Figure 12. Cost of Competition Factor = 0.50 Figure 13. Cost of Competition Factor = 1.00

Conclusion Conclusion Conclusion In the 2-person Human Interaction Model: Selfish individuals will always win in the standard 2-person Human Interaction model Utility decreases rapidly as the level of Selfishness increases within the first 100 games Increasing the Common Good Factor (CGfactor) will increase Altruism and Mean Utility Increasing the Selfish Factor (SFfactor) will increase Selfishness, but wouldn’t increase Mean Utility as much as CGFactor Increasing the Cost of Competition Factor (Cfactor) will increase Altruism, but decrease Mean Utility Effective way to reduce Selfishness is to increase the Common Good Factor (CGfactor) or the Cost of Competition Factor (Cfactor) – where, the Common Good Factor (CGfactor) is most effective Effective way to increase Utility is to increase the Common Good Factor (CGfactor) or the Selfish Factor (SFfactor) – where, the Common Good Factor (CGfactor) is most effective Is it better to be selfish or altruistic in 2-Person everyday human interactions? It is better to be selfish in the standard 2-person Human Interaction model, as Altruistic individual perish quickly. However, it is not useful to be highly selfish as these individuals obtain lower utility due to negative effects from the cost of competition.

Future Research Directions Punishment: In this model, we can add punishment (in the form of Strong Reciprocity) and test if that makes any difference to the level of Selfishness and Utility in the game. I have included this in my research, while it is not part of this presentation. That research shows that punishment is not as effective as a change in the Common Good, Selfish and Cost of Competition factors explained in this presentation. Small World Networks: There could be a possibility of developing this research into the concept of 2-person human interaction in networks or small worlds. We as humans have relationships (permanent or semi-permanent) with other individuals in society, for example, our immediate or extended family (permanent relationships) and friends or acquaintances (semi-permanent or temporary relationships). Also, we don’t know everyone in the world, therefore these networks will consist of individuals we don’t know or don’t have an acquaintance with. Socio-economic and Psychological factors: We could also analyze the different socio-economic impacts of factors, for example, fairness, trust and fear in such 2-person human interactions.