Jason Kircher Game Theory, Long Modeling Project 5/9/13 Roommate Request It happens at college campuses across the

nation at the same time every year. Students are in the middle of their second semester, finishing midterms and looking forward to spring break, and praying for good weather to come sooner. All of a sudden, you hear murmurs and rumors of the big question: what are you going to be doing for housing next year? But no matter if you are living in a dorm, an apartment, a house, or off-campus, the question of whom you will be living with has to be answered first. It is in this context that the game of Roommate Request is played. Players: There are three players in this game. The main players are Roommate 1 and Roommate 2 (simplified hereafter as R1 and R2, respectively). The third player is Nature, who more or less adds a level of uncertainty to gameplay in the middle of the game. Interactions: (See Appendix A for game tree) Roommate Request is an extensive form game. It starts off with simultaneous play between R1 and R2. Both players are choosing to Initiate a conversation to room together again next year, or to Look Elsewhere for a different roommate. R1 chooses between Initiate and Look Elsewhere, and R2 is presented with an information set. R2 does not know whether R1 is planning to Initiate a conversation or is currently Looking Elsewhere. This set up allows the game to be modeled as if simultaneous play is occurring. So, without seeing R1s choice, R2 also chooses between Initiate and Look Elsewhere.

There are different outcomes and levels of gameplay that follow the simultaneous move. If both players choose to Initiate a conversation, then that effectively ends the game. Each player approached the other roommate to room together again, and they do so. The more interesting aspect of the game occurs when either R1 or R2 chooses to Look Elsewhere and the other roommate chooses to Initiate. In this scenario, Look Elsewhere acts as an opportunity to see what other options are available for roommates an information finding option. At the time of gameplay, the only information the players really know is what it is like to live with their current roommate the good, the bad, and the ugly. All students at every college are playing the same game with their own roommates, and so many are choosing to seek out new roommates. By choosing to Look Elsewhere, a player is seeking to find out his options for a future roommate. This is where Nature comes in to play. Nature acts as an outside force that dictates the kind of roommate that can be found should a player choose to Look Elsewhere. Nature either provides a Better roommate than was had previously, or with a Worse roommate than before. To be explicitly clear; neither roommate knows at the start of the game whether Nature has provided him with a Better or Worse roommate. However, choosing to Look Elsewhere provides him with that information. Once the choice to Look Elsewhere has been made, that player is informed whether or not there is a Better or Worse awaiting him. Then, the last remaining decision can be made. Whether or not Nature picks a Better roommate or a Worse Roommate, the player will choose either his Old roommate or the New candidate that is available to him. Should both players choose to Look Elsewhere, they both get their own decision trees. Nature gives each of them a draw, dictating for each player separately whether they

have a Better or Worse candidate to live with. Once Nature plays, both R1 and R2 separately decide based upon their best interests to go back to the Old roommate or take the New candidate to live with next year. Strategies: Roommate 1: Initiate/Look Elsewhere; Old/New Roommate 2: Initiate/Look Elsewhere; Old/New Nature : Better/Worse

Payoff Assumptions: The first payoff to discuss is the norm or standard to compare the rest of the games outcomes to. In this game, the standard of comparison is the payoff for both players choosing to Initiate. For both players to choose the other right off the bat gives them each a payoff of 10. If one roommate chooses to Look Elsewhere while the other Initiates, things get trickier. If nature provides the curious roommate with a Better option, he will get a payoff of 15. This is the perfect roommate, the ideal living situation. If, whether he gets a Better option or a Worse option, the player still chooses to go with his Old roommate, he then receives 7. Although Look Elsewhere is a fact-finding mission, it is a costly one; the conflicts that would occur because the current Roommate wasnt chosen immediately would lower the resulting payoff. And if Nature provides a Worse candidate, and the curious roommate choses him, he gets a payoff of only 3. For the roommate who chose to Initiate but wasnt reciprocated with, there are only two payoff numbers. He would receive 7 if the curious roommate chooses Old (the initiator) and 3 if he chooses New, since the initiator is left without an option. Both of these

outcomes are not dependent on whatever hand Nature deals the curious roommate. For this game, we are not interested in what the left out roommate will now do if he were to join up with the new group, or to venture on his own, both would result in a bad outcome because of the embarrassment of choosing the current roommate but not being chosen as well. If both roommates choose to Look Elsewhere, the same outcomes apply. Both R1 and R2 would be given a hand from Nature individually. If they find a Better candidate, and choose the New candidate, they get 15 as their payoff. If they ever choose their Old roommate, they get 7, no matter Natures choice. And if they get a Worse roommate, and choose the New guy anyway, they receive 3. The same results apply for what the other Roommate receives as before 7 if chosen, and 3 if not. Analysis: As rational players, both Roommates are looking to maximize their utility. They are essentially trying to find a way to gain the glorious payoff of 15 after choosing to Look Elsewhere. But alas, only Nature knows if that outcome is possible. If Nature gives them a bad draw, they will only end up with a maximum of 7. The second best outcome is to both coordinate and both Initiate a conversation each of them receives 10. To determine what they should do, both roommates would go through the same procedure, as follows. What the player Nature does is pick between two different types of world one where there are Better roommates with a probability of p, and one where there are Worse roommates with a probability of 1-p. Using the known payoffs, and the probabilities of Natures choice, an expected utility inequality can be set up as follows:

EU (Look Elsewhere) EU (Initiate) 15p + 7 7p 10 8p 3 p 3/8 The two functions being compared are the expected utility of Look Elsewhere and the expected utility of Initiate. Since the players are trying to determine how they can receive a payoff of 15, we will set up the inequality to find the value p at which choosing to Look Elsewhere will provide a greater than or equal to expected utility than choosing to Initiate. Choosing to Look Elsewhere provides an expected utility of 15p + 7 7p, combining both the outcomes that would be chosen if Nature provided a Better roommate or a Worse roommate. The expected utility of Initiate is 10, with no influence from Nature, so no variable of p. After solving for p, it can be determined that p needs to be greater than or equal to 3/8 for the expected utility of Look Elsewhere to be greater than or equal to the utility of choosing Initiate. So, if p is greater than or equal to 3/8, both players would choose to Look Elsewhere, and would be able to expect a better utility than 10 based on their beliefs of what Nature will give them. Should p be less than 3/8, both players would choose to Initiate, and end up with a utility of 10 each. The Nash Equilibrium Strategy Set for both players would be as follows: {Initiate, New, Old, New, Old} IF p < 3/8. {Look Elsewhere, New, Old, New, Old} IF p 3/8. Discussion: The Roommate Request game models fairly accurately what actually happens when students choose roommates for the following year. The payoffs given seem to portray what

is actually known. Everyone knows their current situation and living conditions, and can expect those to continue. But there is some probability that somewhere on campus, the dream roommate exists, with whom everything about living together would be more ideal. On the flip side, finding that person does not always happen, and it is possible to be hurt by looking around rather than sticking with what is known. This Nash Equilibrium is going to remain in this model as long as only a few criteria remain the same. If the dream roommate gives a higher payoff than the current roommate, but looking elsewhere is costly to rooming with the current situation again, then this strategy will hold firm. Payoff numbers themselves can change; but the only change that occurs in the strategy is what belief or probability (value of p) that Nature will give a Better roommate must be. Both roommates do not have to have the same payoffs either. Currently, this game is symmetrical, with both Roommates having the same payoffs for making the same choices. But in reality, certain roommates have different opinions on what their current living situation is like. This model would still hold up under different payoff assumptions. The only change that would have to be made is for p; roommates who enjoy their current living situation needs a higher p value than those who do not to Look Elsewhere for a better option. This model holds well for any returning student on campus. However, it might not do justice for freshmen. They were placed randomly into their living conditions, and are meeting completely new people all year long. For freshmen, it might be more accurate to say that Looking Elsewhere weakly dominates ever Initiating. Your current roommate might not be that great, so much so that he or she is on par with Nature dealing a bad draw.

This model is quite ideal for other applications as well. For people in significant relationships, this model can be used to determine if one should stick with their current interest, or seek out what other options Nature might throw their way. Businesses working together can use this model as well. Some partnerships are great; but its possible that by shopping around, better deals or better partners can be found. In both of these examples, a better option could be out there but finding out hurts your payoff should you find it is better to stay with what you had. This game is broad enough to capture most situations where two players are currently in a relationship, and have the ability to either continue together or look at other possible (but unknown) options. Limitations and Extensions One of the main limitations of this game is that Initiating commits the player to staying holding the course, no matter what Nature decides or what the other player decides. If R1 Looks Elsewhere, and R2 Initiates, does that really mean that R2 would just end up with whatever R1 decides in the end? It seems to be that R2 ought to continue playing, knowing that he must now look elsewhere, rely on Nature to give him a candidate, and so on. A good extension of this game would be to give different players different values for p. In reality, no two roommates are exactly alike. One person is more popular than the other; one person has more connections; one person is a shut-in. While both are dependent on Nature to give them their options, certain players might have a higher probability than others to find a Better roommate. Being captain of the soccer team or leading in student government would increase your odds for finding Better options. And for some people,

possibly the more introverted who are not as social with many people all at once, or for those who are actually shy, Nature might not be so kind in the realm of probabilities.