On rational choice

Originally posted via twitlong, 7 Sept. 2014


I’ve seen a handful of individuals claim a lack of faith in the consumer throughout this mess. Let’s discuss that in terms of game theory and rational choice. Let’s strip all ideological and normative arguments for a moment and look at this scenario from the most succinct, viewpoint-neutral perspective possible:

Gaming news outlets have run a series of articles that have incensed their consumer base. Consumers have responded with an organized blockade of these sites through use of ad blocks, archives, and proxies (and an advertiser-writing campaign) to deny them page views and ad revenue.

I believe that’s an description with which we can all agree, whatever our opinions may be. Consumers’ actions seem to be working: analytics for those sites who have engaged in this behavior are sharply declining, while those who have not are increasing. If you don’t wish to take my word for it, check Alexa yourself. I’ll wait.

A little bit of Game Theory 101: rational actors make choices based upon self-interest. That self-interest is to minimize the probability and impact of negative (or worst-case) scenarios, and to maximize the probabilty and impact of positive (or best-case) scenarios. That’s known as the “minimax” or sometimes “maximin” rule. In this case, the self-interest of the news outlets and parent companies’ is to maximize revenue stream; they are ultimately for-profit corporations, after all.

At this point, the businesses involved have a choice between two available options: to concede to consumers’ demands, or refuse. This decision is mediated upon, as has been posited, consumers acting in good or bad faith. This yields four potential outcomes:

1. If businesses refuse to concede and consumers are acting in bad faith, not only is it likely ad block and other revenue-denying devices have already been employed (making this a moot point), the blockade continues nevertheless. Revenue loss continues.

2. If businesses refuse to concede and consumers are acting in good faith, the blockade continues. Revenue loss continues.

3. If businesses concede and consumers are acting in bad faith, while the blockade may formally end the use of ad block and other revenue-denying devices are likely to continue (making it a moot point). Revenue loss continues.

4. If businesses concede and consumers are acting in good faith, the blockade ends and consumers cease the use of revenue-denying devices. Revenue loss ceases.

A constructed, visual payoff matrix can be viewed here:

As you can see, involved businesses’ only positive outcome lies with conceding to the consumer. Consumers’ intent is, for the businesses, irrelevant as there is no positive outcome if consumers are acting in bad faith. Concession is the only rational choice.