Category Archives: Video Games

A Wii Bit of an Error? Price Matching as Price Fixing

Yesterday, Sears made a wiiiiii bit of an error, selling a new Wii U for the bargain price of $60, a sharp markdown from the standard $300 price tag. People caught on and immediately bought as many as they could. That was smart. Sears eventually pulled it, though. So smarter people went one step further: they visited other retailers and bought $60 systems using price match guarantees, i.e., promises retailers make to sell like-goods at the lowest price of their competitors. Particularly crafty individuals allegedly went from Wal-Mart to Wal-Mart clearly out the storerooms.

This raised a moral question: is it right for consumers to take advantage of Sears’ mistake, manipulate the system, and trick (“trick”?) other retailers into also selling their products at a loss? Some people on Reddit felt that way:

I think I’d feel guilty doing that. But dang that’s a good deal.

Am I the only one who thinks it’s kinda [bad] to make another store pay for Sears error? You know it’s a error so why make it someone else’s problem?

Is there a difference between a legitimate offer / deal and taking advantage of a mistake? I’ll see you all in hell, which is where I’ll be down-voted into, where I can play Mario Kart with you thieving [lovely individuals].

I can certainly see their point. However, I don’t think that anyone should lose sleep for taking advantage of Target and friends for price matching. Why? Because one of the main reasons to create price match guarantees is to screw you over.

Wait, what? How can price matching possibly be bad for consumers? After all, it allows consumers to pay smaller prices. It could not possibly hurt consumers, could it?

Unfortunately, it can. Price matching is a form of price fixing, cleverly disguised as a nice gesture toward consumers. The key is how companies act in the bigger picture with price matching in place.

Imagine that you are a company and you have widgets to sell to consumers. You would like to charge your consumers a lot of money to pay for your widgets. However, there is a rival company that sells identical widgets. So if you charge a high price, all of the consumers will go to your rival, and you will make no money. Of course, your competitor has the exact same incentives. As such, you both end up charging very low prices. All of potential profit to be made from widgets has gone up in smoke.

In game theory, we call this situation a prisoner’s dilemma. Broadly speaking, this is a situation where both actors must individually choose whether to act kindly to the other (raise prices) or act uncooperatively (lower prices). Regardless of what the other side does, you have incentive to take the uncooperative action—this is because you can take all of the profits if the other side raises prices and still maintain parity in case they also lower theirs. However, the other side has the exact same incentives. So both of you take the uncooperative action even though this leaves you collectively worse off than if you both took the cooperative action.

If this is confusing, it might help to look at the problem visually:

 

Still with me? Okay. The point of the pricing prisoner’s dilemma is that it sucks up all of the revenue for widgets and leaves it in the pockets of consumers. This obviously makes those consumers very happy. But the companies would bend over backwards to figure out a way to collude to raise prices to monopoly levels. Yet successful collusion requires preventing the other side from undercutting one’s own price. After all, I don’t want to charge $10 for widgets if you are just going to screw me over by charging $9.

See where this is going yet? Price matching serves as this precise enforcement mechanism. Imagine that I announce that I will match any price you offer. I then charge $10 for my widgets. What are your incentives? Obviously, charging more than $10 is a bad idea, as I will take all of your business. So what if you undercut me instead? Well, you can’t. If you sell your product for $9, discerning customers have no reason to flock to your business because they can also get the widget for $9 from me thanks to my price match guarantee.

What to do? Well, you could also charge $10 and institute your own price match guarantee. For the same reasons as before, I don’t have incentive to undercut you either. We can both sustain the price of $10, well above what we would charging in a competitive environment.

So, despite appearances and Federal Trade Commission approval, price matching is a form of price fixing. It is intentionally designed to reduce competition and increase prices.

This makes the $60 Wii U price matching incident all the better: consumers used a policy designed to screw over consumers to screw over those who instituted the anti-competitive price fixing.

TL;DR: Karma.

The Game Theory of Mario Kart 8

Although racing games usually do not involve much strategic interaction*, Mario Kart 8—and its dastardly item blocks—require some thinking. Over the past few months of play, I have put my on my methodological hat and found at least three topics that game theory can help sort out. Let’s get to it.

(*Of course, just about all racing games require good strategy to beat opponents—things like knowing how to cut corners, boost properly, accelerate at the start of the race, etc. Because game theory is the study of how individuals interact with each other, I am focusing on the strategically interdependent decisions—i.e., those that require me to think about what you are doing and for you to think about what I am doing.)

Mario Kart Is a Defensive Game
Here is a common but critical mistake. You race toward an item block and pick up a red shell. A split second passes by. You see a helpless opponent directly in front of you and let it loose. The red shell strikes him, and you overtake his position.

A successful maneuver? Hardly. The opponent behind you has a red shell and does the exact same thing. You explode, losing two valuable seconds. Five people pass you, including the guy you shelled. Your net gain is negative four positions.

Ready to fire? You might want to wait.

The problem here is one of externalities. When you hit someone with a shell, you benefit some. But so does everyone other than your poor victim. Thus, you only internalize a fraction of the overall benefit; most of the benefits are external to you. Meanwhile, the target internalizes every last bit of the damage.

In turn, whenever you fire off a shell, you are gambling that the small bit of benefit you internalize from striking your target exceeds the potential loss you will suffer if a shell hits you because you no longer have protection. The odds are clearly stacked against you. Hence, Mario Kart is primarily a defensive game, at least when it comes to items.

Of course, that does not mean you should always keep your shells and peels in inventory. If you are in second and have a lot of space behind you, that red shell may be your only option to reach first place. Meanwhile, when you are not in first place, keeping a shell forever is worse than dropping it before the next item block, where you will hopefully roll a mushroom or something of the sort. So you should use your items; you just need to be judicious about the timing.

On that note, the previous paragraph reveals a good time to use a red shell against an opposing Mario holding some sort of protection. If Mario is going to get rid of it, it will be right before he hits the item blocks. Anticipating this, you can time the shell just right so that Mario dumps the protection before impact.

The Item “Duel”
A “duel” in game theory is as it seems: two gunslingers have one bullet and slowly move forward until one is ready to shoot at the other. Shooting from further away has the benefit of preempting the opponent but is more inaccurate and risks allowing the other party to take a clean shot at you later. Waiting is also potentially bad because the other side might kill you first.

What to do? Modeling the dilemma produces an interesting result: both parties shoot at the same time! Yet this is perfectly reasonable if you think about it. Imagine that you were planning on shooting slightly sooner than the other party. You will hit him with some degree of probability. But if you wait just a fraction of a second longer (but before he plans to shoot you), the probability you hit him increases slightly. So you should wait. But that logic recurs infinitely. As a result, when the gunslingers behave optimally, they will shoot at the same time.


 
“Duels” like this have important applications, including helping to explain why two rival video game companies often release their new systems at the same time. (It also applies to competitive cycling sprints. If you have never seen this, it is very bizarre. Despite appearances, that is not slow motion instant replay.) The strategic dilemma also shows up in at least a couple situations in Mario Kart. First, imagine you are neck-and-neck for first place with an opponent and you receive the spiny shell warning. Suddenly, your incentives change. Rather than racing to first place, you should slam on the brakes and try to get into second place. That way, the shell hits him and you can move along.

Of course, your opponent has the exact same incentive. So in the split second you have to react, both of you end up pressing the brakes at the same rate, analogous to choosing to shoot at the same time. And just like a duel, sometimes you both end up dying because the explosion has such a large blast radius.

spiny

The cause of countless nightmares.

Less frequently, you might encounter a similar breaking situation around a block of items. Item blocks give better items as a player’s position increases. So if you are with a pack of four people neck-and-neck, there is a great incentive to gently press the brakes, fall back to fourth, and get three mushrooms instead of the banana peel instead. However, once again, all players have a similar incentive, resulting in the entire bunch slowing down (or at least those with the strategic wherewithal). Indeed, whoever goes into first might have a temporary advantage but will quickly fall behind due to inferior items.*

(*Item selection may be a bit trickier than what it says here. Check the comments below.)

The Game that Isn’t a Game
Finally, I want to talk about the game that isn’t strategic at all: course selection in online play. If you haven’t played online before, the system works like this. The game queues up to 12 players and randomly selects three courses. You choose one of these courses or a “random” option. After everyone has submitted their picks, the game randomly draws one player. If that player selected a course, everyone plays that track; if that player selected random, then the game randomly picks a course from the pool of all 32.

course select
The course selection screen. Optimists like this one will soon find all their hopes and dreams crushed.

How should the course selection mechanism affect what you enter into the lottery? As it turns out, you don’t have to do any real thinking. You should just pick the track that you like the best. Unlike a traditional voting system, you don’t have to worry about what everyone else will pick. After all, if the game randomly selects your choice, then you are best off picking your favorite track; and if it chooses anyone else, then your selection is irrelevant.

If the course selection isn’t strategic in any way, then why am I talking about it? Well, as it turns out, such a mechanism that compels everyone to truthfully pick their favorite track is exceptionally rare. Economists and political scientists care about these issues greatly because effective voting mechanisms are of vital importance for both corporations and democracies. Unfortunately, the scholarly results are decidedly negative. In fact, the Gibbard-Satterthwaite theorem says that individuals will have incentive to lie about their preferences unless a person is a dictator, some options can never be chosen as the winner (i.e., we never play Mount Wario), or the selection mechanism is non-deterministic.

To see what I mean, imagine that the three tracks to select from are Music Park, Royal Raceway, and Toad’s Turnpike. (I’m going to ignore the random option for simplicity.) A majority (or plurality) of votes win. Suppose there are four other players you are squaring off against. Further, imagine that two of these guys prefer Music Park to Royal Raceway to Toad’s Turnpike; the other two prefer Royal Raceway to Toad’s Turnpike to Music Park. Meanwhile, you prefer Toad’s Turnpike to Music Park to Royal Raceway.

Is it rational for everyone to vote for his or her favorite course? No. If everyone did, we would have two votes for Music Park, two votes for Royal Raceway, and one vote for Toad’s Turnpike. With the tie between Music Park and Royal Raceway, the game might break it with a coin flip. The result is a 50% chance of Music Park and a 50% chance of Royal Raceway.

But imagine you misrepresented your preferences by voting for Music Park instead. Now Music Park has a strict majority and becomes the course that everyone will play. That is better for you than a 50% chance at Music Park and a 50% chance at Royal Raceway (your least favorite course). So you should lie! This means a majority/plurality system forces you to think about what others will select rather than just focusing on your own preferences.

While it might not be surprising that I can craft an example where you have incentive to lie, what is shocking is that just about all voting mechanisms suffer from this problem. That is the magic of the Gibbard-Satterthwaite theorem—it jumps from examples of failures to saying that just about everything will fail. The only way to break out of the problem is to give someone dictatorial powers, eliminate some choices from winning under any circumstance, or have the voting mechanism choose non-deterministically. Nintendo’s selection system opts for the last resolution.

In sum, just pick what you want on the course selection screen. And thanks to the incentive to tell the truth, let me tabulate all of your selections to investigate the world’s favorite courses.

Happy racing!

Mario Kart 8’s Most Popular Tracks

Mario Kart 8 has consumed most of my entertainment hours since it came out a couple of months ago. Its online play is great. When you queue, the game randomly gives you three (of thirty-two possible) tracks to pick from, or you can select random if none are to your liking. Social scientist that I am, I saw an obvious data collecting opportunity. So the last few weeks, I have painstakingly charted every single choice I have observed. This allowed me to create a rough ranking system of all the tracks in the game. Which track do people like the most? The least? Check below:

mk1

The numbers reflect the percentage of the time I observed players picking any given track, not the track the game randomly selected from those ballots. For example, over the many, many times Sunshine Airport randomly popped up in the queue, players selected it 48.3% of the time. The tiers simply cut the data into a top bucket of four and four other buckets of seven.

There are a number of important caveats to the image, so please read what follows before boldly declaring that Bone-Dry Dunes is the worst thing Nintendo has ever created.

  • I don’t claim that this is the be-all, end-all to Mario Kart track popularity. Rather, without any other metrics to rank the courses, I think that this is a useful first-cut at the question.
  • While I gathered a lot of data to do this, I am only one man. The number of potential picks ranges from 113 for Water Park to 258 for Bone Dry Dunes. We should expect such randomness from the queue selection system. However, it also means that some of these percentages are secure than others. I plan on continuing to collect data over time.
  • Be careful about making pairwise comparisons. Based on what I have, it is reasonable to conclude that players prefer GBA Mario Circuit (41.8%) to Electrodome (27.7%), but it is not reasonable to conclude that players prefer Electrodome to Mario Kart Stadium (27.5%).
  • With people duo queuing, I included both votes. I can see why people might think this should only count as one, but the choice from a duo queue (in theory) reflects the preferences of two people. So I count it twice. It would be very difficult to count them as one vote anyway; I would have to keep tabs on who is submitting at the same time, which difficult when I am trying to count so many things at once.
  • I collected the data as I rose from 2000 to 3100. So if you believe that preferences are different for this group than a different one, you are not looking at the image you may wish to see.
  • I did not count my votes. We want a measure of what people like the most, not what I like the most.
  • I excluded “forced” votes that occur if players take more than the allotted time to make a selection. These votes are pure noise anyway.
  • An active vote for random counts as a vote against everything else. For example, suppose the choices were Yoshi Valley, Royal Racewway, and Music Park. Three players select Yoshi Valley and one picks random. Then Yoshi has received three of four votes and the other two tracks have received none of the four. In other words, the “random” doesn’t magically disappear from the denominator in the data tabulation.
  • I only played worldwide games.
  • These were all races. No battles.

And now for a little bit of analysis:

  • I did some fancy statistical tests to see if a variety of track qualities (length, difficulty, newness) determines player preferences. All of the results were null. So whatever is driving these votes is highly idiosyncratic.
  • The new Rainbow Road was very disappointing. It was the last track I played when I went through the game for the first time. I was very excited until all I found was boring turn after boring turn.
  • Some might also describe the original N64 Rainbow Road as boring turn after turn, but it seems that Nintendo made a smart decision to turn the course into a straight-shot and not a five lap race.
  • I question Nintendo’s wisdom in putting Music Park, Grumble Volcano, Sherbet Land, and Dry Dry Desert in the game. What’s the point of having classic tracks if no one wants to play them?
  • To be fair, perhaps players actually wanted to see these tracks and just failed in the execution. But that still doesn’t explain why you would put Grumble Volcano back in the game. Its main course feature is that lava randomly shoots up and kills you for no good reason. I understand Mario Kart is full of randomness, but let that come from interactive item blocks and not from the computer.
  • I feel really bad for whoever designed Bone-Dry Dunes.

See you in the queues.

Update: With eight new tracks coming out this week, I decided to update the data one last time. Here’s where we are today:

mk2

I’ll probably run the data once again after the new tracks have been out for a couple months.