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Some Thoughts on the Traveler ’ s Dilemma

In this paper, we will discuss the traveler’s dilemma, a problem famous for its ability to point out how theoretical results of game theory don’t always translate properly into real life applications. We explore the paradox of rational agents being outperformed by agents playing randomly and explain what is the problem with backward induction. We comment on the results obtained by [CGGH99] when carrying out the experiment with real subjects and argue that their modeling of the decision mechanism with randomness may lead to a reasonable fit with the experimental data, but it is of no real use. We point out how the game could be modified by adding randomness in a slightly different fashion to shift away the Nash equilibrium from its lose-lose position. Finally, we show how a simple mechanism of natural selection can provide insight into why people in real life don’t play as “rational” agents and are influenced by the reward parameter.