Mechanism design and the invisible influence of culture and power

From a rather interesting article from mckinsey.com - Leadership and behaviour: Mastering the mechanics of reason and emotion.

Eric Maskin: Mechanism design recognizes the fact that there’s often a tension between what is good for the individual, that is, an individual’s objectives, and what is good for society—society’s objectives. And the point of mechanism design is to modify or create institutions that help bring those conflicting objectives into line, even when critical information about the situation is missing.

An example that I like to use is the problem of cutting a cake. A cake is to be divided between two children, Bob and Alice. Bob and Alice’s objectives are each to get as much cake as possible. But you, as the parent—as “society”—are interested in making sure that the division is fair, that Bob thinks his piece is at least as big as Alice’s, and Alice thinks her piece is at least as big as Bob’s. Is there a mechanism, a procedure, you can use that will result in a fair division, even when you have no information about how the children themselves see the cake?

Well, it turns out that there’s a very simple and well-known mechanism to solve this problem, called the “divide and choose” procedure. You let one of the children, say, Bob, do the cutting, but then allow the other, Alice, to choose which piece she takes for herself. The reason why this works is that it exploits Bob’s objective to get as much cake as possible. When he’s cutting the cake, he will make sure that, from his point of view, the two pieces are exactly equal because he knows that if they’re not, Alice will take the bigger one. The mechanism is an example of how you can reconcile two seemingly conflicting objectives even when you have no idea what the participants themselves consider to be equal pieces.

The bit I quoted above really struck me as either lazy thinking, or unintentional blindness.

It bugs me that Eric Maskin uses children in a room with cake to generalise about human behaviour, without specifying important stuff.

Such as:
Where are the children from?
What are their cultural norms?
What is their relationship to each other?
Will their actions have any repercussions beyond getting less cake?

Happily ignoring all those things, Maskin goes on to apply this concept to management and organisations. Which means that power differentials and politics are also ignored, along with what I previously listed about cultural norms and relationships. It also focuses on an extremely short-term goal.

If the cultural norm is to appear generous...
...then Bob will cut an obviously smaller piece, which lets Alice choose the bigger piece if she wishes to. She may not, she may also wish to appear gracious, and take the smaller piece. But regardless of what happens, it's doubtful to me that the cake would be divided equally.

If Bob has more power - maybe he has the ability to beat Alice up without being scolded for it, even if he doesn't actually want to
...then Bob will whatever he thinks is fair, and count on Alice's fear of him, and understanding of the difference in power, to control which piece she takes. Which means that if Bob cuts an obviously smaller piece, he'll get a nice big piece. And if he cuts an even portion, then he'll get to feel good about himself. And in both cases, Alice's 'choice' isn't really a free choice.

Srsly Nugget? It's just cake!
You could argue that Maskin stated that 'Bob and Alice's objectives are each to get as much cake as possible', but it's pretty obvious that cake is a metaphor for money (or resources).

The fact is, in the real world, choices are rarely so clear and simple. There are always trade-offs. Of course every worker wants to 'get as much cake as possible'. ;) But maybe some workers will take less cake now, if it means a more reliable supply of cake in the future. (I.e. a foreign worker on a temporary visa will likely settle for less 'cake' until they're able to get a permanent visa.)

Humans are complicated. It's never just cake. ;)

Forsaken World: Psychology + Framing + Virtual Economy = PROFIT!!!!!111!!1

So I've written a couple of posts about Forsaken World's economy. Here's where I explain how currency is gated, and how much things are worth in USD, and here's where where I talk about how PWE has elegantly solved the 'gold faucet' problem that's plagued the genre since MU* days. This post has more details on how the core Pay-2-Win stats are tied to the game's economy and currency.

Since I wrote those posts, PWE has made some brilliant adjustments to the entire game economy that I'm willing to bet a month's salary ;) has boosted their profit appreciably, and possibly massively.

It's also led to this being the first time I've seen a virtual economy model the RL problem where the rich get richer, and the poor, poorer.

Best of all, these adjustments are so Machiavellianly (lol word?) brilliant that, instead of causing players to blame PWE for these changes that benefit the few at the cost of the many, PWE has cleverly framed it so that players blame EACH OTHER. Not PWE. Not the instigators and architects of the changes who stand to gain the most.

People were blaming each other, calling each other greedy, having occasional (it's died down a lot now, 6 months later) rages on World Chat about how avaricious other players were. And not a single time, not in a forum post, not in world chat, not in local chat - NOWHERE have I seen anyone point out why and how PWE is at the heart of this change - not mercenary, greedy players who 'overspend' in the CS and then 'lord it over everyone else'. ;)

Such brilliant framing and manipulation of psychology cannot go unsung!

Sing it here, in all its glorious goldenness, I shall!

 

The Back Story
Before PWE 'tweaked' the economy (about 8 months or so ago), people could only convert a maximum of 5 Mercury Statuettes to gold, per day, per character, via a quest - and (iirc) how many times you could do this was also linked to your level.

For purposes of clarity, I will do a direct conversion from gold to USD. This is NOT how PWE does it, PWE gates you through 4 different currencies, and if you're not from the US, you can count that as 5, because you have to think about it in your own currency as well.

This means that people could only gain a maximum of 25g (US$2.50) a day on average per character via direct gold conversion.

This in turn meant that 'whales' would buy Mercury Statuettes in the hundreds from the cash shop, and then vendor them to other players for anywhere from 3g50s to 4g. The reason for this (if you didn't read / don't remember my previous posts) price range is: If you buy a Mercury Statuette from the Cash Shop (US$0.50) and sell it to a specialised in-game NPC, the NPC will give you 3g (US$0.30). If you do daily quests x 5, you'll get anywhere from 4g80s (US$0.48) to 6g (US$0.60) per Statuette+quest.

Whales were thus buying wholesale, then selling to minnows and plankton, because it was the fastest and most profitable way for them to get a lot of gold within a single day.

Of course, this meant that the only people seriously spending in the Cash Shop were the whales.

The minnows (small spenders, say... US$15 a month...) were only spending the bare minimum, and might not even be spending that much a month, because they had no incentive to do so. Because *in general*, unless they were looking for a large chunk of change NOW for a big purchase - say a mount, or a skill scroll - they could slowly build up their cash via Statuettes bought from the whales. Not much reason to purchase anything from PWE, other than impulse.

The plankton (truly free players) were obviously spending nothing! Because if they were willing to sloooowly increase their cash via Mercury Statuettes bought in-game from whales, and playing longer / smarter / etc... they had absolutely no reason to buy from PWE at all. Patience and buying stuff from whales was always cheaper than buying from PWE. And of course, buying from whales costs no RL cash.

 

The Change
PWE studied the situation, doubtless came up with a much more nuanced analysis than I gave above. They then quietly, strategically, and subtly changed one thing - with a ripple effect that I'm pretty freaking sure boosted their profits immensely.

They made it so people can now convert 25 Mercury Statuettes a day, rather than just 5.

 

The Results
Statue prices shot up from 3g50s to 4g75s minimum. 4g60s you can get... if you find a special whale to do a special deal with.

This was met with an initial massive outcry from the plankton and some minnows... not against PWE, but against the whales. GREEDY WHALES! OMG U PPL! SO GREDY. NO1 WILL BUY UR STATS! OMG! etc etc blah blah. This particular noisy state of affairs lasted for at least 2 months, but now, 10 months later, it's a non-issue.

4g75s. Suck it up, or buy your own from the cash shop.

And not once, not anywhere, in-game or out of it, did I see players blaming PWE, instead of each other, for the price increases. Simply brilliant.

 

But Wai Nuggeet, Wai Brilliant?
Because in one fell swoop, PWE:

Made whales happier by giving them a way to get more personal profit when buying from PWE, thereby giving them even more incentives to buy directly from PWE.

Converted some plankton to minnows.
You see, with this change, and the corresponding hike in prices, it's no longer viable to try to get your cash via Statuette quests if you're a plankton. Minnows with a nice little nest egg (which I was), and whales (should they choose to buy from other whales) weren't all that hard hit by the change.

In truth, both whales and minnows benefited - the changes made it possible for them to trade in bulk. So if you had enough gold on hand (minimum 1Diamond - US$10), you could invest, buy at least 25 statues a day, and either not be affected by the price hikes, or else, get even more back - since more statues can be converted.

If not - then as plankton, you'd be best served by *buying* US$10 worth of statues from PWE as your starting capital. And, you know, it's almost never 'just a this time' after you make that first purchase.

Made sure being a plankton was a lot less attractive, and a minnow a lot more so.
No capital to make the initial purchase, and can only buy one or two Statuettes at a time? Tough luck, suck it up, peasant. ;) Watch 'everyone' getting richer while you get poorer.

Acquired a lot more paying customers, and changed their economy to encourage paying customers from the ground up - without alienating their existing customers, whether plankton, minnows, or whales. There was no community perception of PWE as the greedy one, and certainly no hostility. Some, in fact, widely viewed this move as doing 'everyone' a favour.

 

Ahhh PWE... if you can't grow up to be good, you may as well grow up to be good at being evil. ;)

 

F2P Pricing Models & Preying on Decision Fatigue - NYT via NorthTemple

“Decision fatigue helps explain why ordinarily sensible people get angry at colleagues and families, splurge on clothes, buy junk food at the supermarket and can’t resist the dealer’s offer to rustproof their new car. No matter how rational and high-minded you try to be, you can’t make decision after decision without paying a biological price. It’s different from ordinary physical fatigue — you’re not consciously aware of being tired — but you’re low on mental energy. The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts, usually in either of two very different ways. One shortcut is to become reckless: to act impulsively instead of expending the energy to first think through the consequences. (Sure, tweet that photo! What could go wrong?) The other shortcut is the ultimate energy saver: do nothing. Instead of agonizing over decisions, avoid any choice. Ducking a decision often creates bigger problems in the long run, but for the moment, it eases the mental strain.”

Yes, yes, not all F2P models are evil.

But of those that are (even the amazingly beautiful luscious evil that is PWE's Forsaken World), I suspect a lot of them depend on decision fatigue pushing people to buy impulsively without calculating the costs, whether in-game or in actual cash.

It would also explain why I simply can't understand some of the Auction House prices in Forsaken World - where I've seen people selling stuff for half of what it's worth in actual currency, if you were to convert actual to FW's currency.

...people are tired, impulsive, don't want to do the math (gated through 4 currencies), and they want money NAO. So they buy a high-priced item and undersell it, because they honestly don't know it's worth / are too tired to think through its conversion.

I have personally worked out these numbers for some in-game acquaintances when telling them to buy/sell higher/lower, and they simply don't want to listen. That's too much work! Games should be fun! Let me spend my moneh how I want! Fairynuff.

I don't mean to imply I'm immune to this too. In FW, converting currencies (through all 4 gates) has become second nature for me. But in the other PWE games I've played, decision fatigue from constantly WATCHING myself (can't do this can't do that) contributed hugely to my dropping the titles.

...PWE are like the evil marketing gods the evilmarketingbits of nugget want to grow up to be.

Adam Phillips on the happiness myth | Books | The Guardian

We all want to be happy, we want our children to be happy, and there are countless books advising us how to achieve happiness. But is this really what we should be aiming for?

Interesting stuff on the nature and pursuit of happiness, and whether the pursuit of happiness *should* be a right.

After all, lopping off the legs of a live dog (or substitute sentient creature of your choice) and then chomping on the bloodied spasming toes might make me incredibly happy, but there might just possibly be something wrong with making the pursuit of that particular type of happiness a right.

(Of course, if you're a Rot Wallow, that makes it all okay.)