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I live in a suburb of Tel Aviv. Every morning during rush hour the two streets leading to the highways to Tel Aviv are packed. I try to evade going to the university during rush hour. Unfortunately, the kids start school at 8:30, and therefore quite often I have to trail to Tel Aviv with many other sleepy parents.
In some countries drivers keep their lane while driving in a multi-lane packed street. This is not the case in Israel. People believe that by changing lanes they can get to their destination faster, even when all lanes in the roadway are equally packed. Plainly one can rationalize this behavior, as one lane may be momentarily faster than the other, and therefore by changing lanes one can progress a little faster.
The streets leading from my home town to the highways consist of four lanes, two lanes leading from the town center to the highway, and two lanes leading from the highway to the town center.
The other day I was going to the University, and the two lanes leading to the highway were packed as usual. I noticed that the car in front of me tries to change lanes. Then I noticed that the car in the other lane also tries to change lanes. Thus, each driver believed that the other lane is faster than his own lane. As they were driving one next to the other, their intentions were common knowledge among them. But then, as Aumann tells us, it should be common knowledge among the two drivers that both lanes are equally slow. Nonetheless the two drivers switched lanes.
Anyone has a good explanation?
It is based on classes that Lakshman Krishnamurthi and I have taught to various audiences over the years. What makes it different from books currently on the market is that it has, shock, horror, equations. I have to thank Lakshman for agreeing to such a foolhardy thing when we want to reach readers with an MBA or equivalent. Any decent MBA program requires some knowledge of probability, statistics and economics. Therefore, why write a book for this audience that does not make use of this knowledge? If we did, we are either hypocrites or contemptuous of our readers (or both).
Our experiences in the classroom (with both full time students and working executives) has convinced us of an appetite for a business book that relies on close and careful reasoning rather than loose analogies and anecdotes. We will see if our students are a reflection of the world at large.
I should note that portions of this book have also been used with undergraduates with enormous success. If you teach a higher level undergraduate econ class and are bored out of your mind, I would suggest offering a class based on this book. It could be used in place of the traditional (soporific) IO offering.
In one respect the Martians are a happy people for they have no lawyers.
Carnegie-Mellon is hosting a summer school on algorithmic economics August 6-10 this year. As I am a participant (admittedly the inf of the set) I think it a wonderful thing. But, I’m vain, petty, self-interested and narrow minded and so my judgement cannot be trusted. However, do inspect the website.