Chapter 2: Q125E (page 131)

Question: In business, do nice guys really finish last?Do “nice guys finish last” in the competitive corporate world? In a study published in Nature(March 20, 2008), college students repeatedly played a version of the game “prisoner’s dilemma,” where competitors choose cooperation, defection, or costly punishment. (Cooperation meant paying 1 unit for the opponent to receive 2 units; defection meant gaining 1 unit at a cost of 1 unit for the opponent, and punishment meant paying 1 unit for the opponent to lose 4 units.) At the conclusion of the games, the researchers recorded the average payoff and the number of times punishment was used against each player. A graph of the data
is shown in the accompanying scatterplot. Does it appear that average payoff is associated with punishment use? The researchers concluded that “winners don’t punish.” Do you agree? Explain.

Short Answer

Expert verified

Answer:

There is a negative association between the average payoff and punishment use. And I agree with the statement, “Winners don’t punish.”

Step by step solution

Step 1: Competitive environment

A competitive environment is a framework in which many firms compete with one another through different advertising channels, promotional techniques, pricing approaches, etc.

Determining the association

We see that, as the average payoff increases, the use of punishment decreases. Maximum use of punishment is when the average payoff is -0.4. Therefore,the average payoff is negatively associated with punishment use.

Yes, I agree with the statement that “winners don’t punish” because of the negative association between payoffs and punishment use. Participants who have received the highest payoffs have not used punishment at all. As the average payoff starts to fall, the use of punishment increases.