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The questions and responses in this forum refer to Chapters 5 and 6 (84-142) in Surowiecki's The Wisdom of Crowds. For reference, the Dialogue Sequence assignment. Discussion leaders will post their commentaries — Team 3 commentary — within a week after the class presentation on October 6.

Question 1 (Chapter 5):
On page 87 of The Wisdom of Crowds, Surowiecki raises the “easy solution” of an “all-powerful central planner” that controls who can go to the bar each week to ensure that the bar is always full, but never crowded. Using the information on pages 87-89, compare this method of crowd control with the strategies used in the studies conducted by Arthur and Bell and Sethares respectively. Which strategy would you want applied to your favorite bar or hangout spot? Why?

Question 2 (Chapter 5):
Based on careful reading of Surowiecki’s analysis of the reasons for movie theater pricing on pages 98-101, do you think movie theaters should price movies according to demand? In essence, should profit maximization outweigh convention in this case? Explain.

Question 3 (Chapter 6):
On page 112 of The Wisdom of Crowds, Surowiecki concludes based on the “ultimate game” experiment that “people would rather have nothing than let their ‘partners’ walk away with too much of the loot. They will give up free money to punish what they perceive as greedy or selfish behavior.” Economists Samuel Bowles and Herbert Gintis called this “strong reciprocity” (116). In your opinion, what causes people to want to punish this behavior when it is obviously beneficial to both to accept any offer? On page 116, Surowiecki says, “individually irrational acts, in other words, can produce a collectively rational outcome.” How is it that pursing this sort of self-interest could benefit the collective good?

Question 4 (Chapter 6):
In a different version of the “ultimate game” experiment, the two participants were given a test and led to believe that the “proposer” earned the right to be such based on its results. In relation to the first ultimate game experiment, “proposers offered significantly less money, yet not a single offer was rejected. People apparently thought that a proposer who merited his position deserved to keep more of the wealth” (114). Based on the text and in-class discussions, why do you think Americans feel that so-called experts deserve more compensation? How does this correlate with the belief that the individual is the site in which knowledge is stored, and how do individual limitations play into this idea?

Question 5 (Chapter 6):
In Chapter 6, Surowiecki attempts to convince us that capitalist markets foster “trust and fairness” rather than “selfishness and greed” as a means of selling their product to consumers. He continues to claim, “Modern capitalism made the idea of trusting people with whom you had ‘no personal ties’ seem reasonable” and that “buying and selling no longer required a personal connection.” Do you think this dwindling of personal interaction fostered today’s ideas regarding trust and lack of personal interaction in regards to the internet?

Question 6 (Chapter 6):
In Chapter 6, Surowiecki suggests the American tax system is so successful because it is based on trust: 1. Trust of neighbors to live up to their obligations 2. Trust of the government to spend tax dollars wisely 3. Trust that the state will find and punish the guilty. Yet, in a time of economic instability, Americans are avidly searching for means of cutting tax dollars. Do you think Surowiecki’s trust system will continue to work, or will the “conditional consenters” no longer consent and keep looking for an out from taxes?

Sarah Tavernaris
In response to Question 3, I think when Americans are blatantly presented with an unfair situation (in this case, a proposer offering low amounts of money while keeping a higher amount for themselves), they feel inclined to call out the injustice, especially since it is at their expense—perhaps because we are an individualist culture and tend to look after self-interest than the collective good. And even though our nation is riddled with corruption in every market, we project an outright illusion of honesty, trust, fairness, and this is the standard we cling to. No one wants to be called a cheat: people do feel (superficially) motivated to uphold fair practices where no one cheats and everyone benefits equally based on the work they put in. Ultimately, this is the ideal goal of a perfectly functioning system which American systems boast to model so well. America claims free market, free society, and opportunity for advancement through hard work and perseverance. Why should the proposer get to make an offer that clearly only benefits him/her instead of the proposed (who ironically at the end, has the power to determine the financial gain of both partners), and for seemingly no reason at all? The proposed feels the other acted unfairly towards them and in their own self-interest. (Think of the little devil on the shoulder…“Well, if he won’t give me a fair amount, then no one gets anything!”) And since we are a society that values individualism, we feel the need to protect our self-interests. Thus, I believe the situation Surowiecki presents is self-interest working both ways: one proposer wants to keep all the benefits, the proposed seeks to keep the proposer in check, perhaps the make a point (If I can’t have it, neither can you.) The illusion of equality and fairness lies thickly over American life, and even though we know it’s superficial, we struggle to keep it functioning.

There is a catch however to the theory above, which is presented in Question 4. The first experiment assumed the two were of equal level, while the second introduced a basic measure of hierarchy: the illusion of expertise. The proposer was described as having done better on a test, which the proposed could judge to imply a higher merit or authority, and therefore more inclined to accept the offer. It’s understandable: in our culture, we bow down at the feet of the experts and put undying trust in them—because they’re experts! We assume they have extensive education and training in the subject and therefore have a heightened authority and perspective. This is shown on a smaller with the variation of the experiment: because the proposer did better on a test and was given the authority to decide the proposition (all in the same context), the proposed may feel inclined to defer to the proposer. Obviously, because the proposer has done better on the test, the proposer must have some secret source of power or knowledge. However, a simple test is sometimes a poor tool to value merit, and oftentimes experts aren’t the best source of knowledge.

Kristen Walker - Response to Question 1

This is an issue that is pervasive throughout American social culture, not just in bars but also restaurants, movie theaters, etc. If someone could actually come up with a strategy for effective crowd control that would still allow for individuals to make their own decisions, that person would undoubtedly be very rich. The problem, of course, is that there is no way to accurately predict the personal decisions of so many people at any given time. Suroweicki’s “easy solution” in which “an all-powerful central planner” (87) arbitrarily determines who can go to the bar each night would effectively work to manage the number of people so the bar never gets overcrowded. However, in the long run fewer people would go to the bar because the negative experience of not being allowed in on certain nights would likely cause them to find another place where they were always welcome. Bell and Sethares’ experiment makes sense because many people base their decisions on past experiences, so if they had fun at the bar last time they went, they are more likely to go in the future. While this is a strong argument, I don’t think it takes individuals’ complex decision-making processes into account. Even if people do not consciously think through factors like the ones Arthur used in his experiment, those factors may influence them on a subconscious level, which could still change their behavior. I think Arthur’s study most accurately predicts people’s behavior, and it is the strategy that I would want applied to my favorite bar because it allows individuals to make a decision based on whatever criteria they think is most important, and it also yielded the best results. Arthur’s study, unlike Bell and Sethares’, also involves different people attending the bar on different nights, so there is always an opportunity to meet new people on any given night, which makes the setting more enjoyable. I think an even better experiment would combine the two studies. Bell and Sethares’ only decision-making factor (based on feelings due to past experiences) could be used as one of the factors in Arthur’s study. Merging the results of both studies would not only result in a better predictor for behavior, but it would also follow the theme of this book that a combination of possible answers is better than just one.

Courtney Carlson
Question 1

Sure, a central planner could in theory mediate bar crowds to ensure that a certain bar is always “full” but never crowded. However, it would be almost impossible to appease the desires of all bargoers each evening, as different people have different preferences regarding how enjoyable a particular bar is depending on its crowdedness. Some people prefer when the bar is seventy percent full, and some when the bar is only thirty percent full. However, according to Surowiecki on page 87, “Even if the central planning of this sort were possible, it would represent too great an interference with freedom of choice. We want people to go to a bar if they want, even if it means they’ll have a bad time. Any solution worth talking about has to respect people’s right to choose their own course of action…” (Surowiecki 87).
Arthur’s experiments with the El Farol project, described on page 88, deduce that people will only have fun at a bar that is less than 60 percent full. That assertion doesn’t really sit well with me. To be honest, I wouldn’t really notice the difference if a bar was 60 percent versus 80 percent full. I certainly agree more with Bell and Sethares’ conclusion on page 89 which says, “All they [the bargoers] really knew was whether they’d recently enjoyed themselves at El Farol or not. If they’d had a good time, they wanted to go back. You might say in fact that they weren’t worrying about coordinating their behavior with the other bargoers at all. They were just relying on their feelings about El Farol,” (Surowiecki 89).
I would be more likely to apply Bell and Sethares’ strategy to my favorite bar or hangout spot. Sure, I would much rather go to a bar where I could actually breathe and hear my friends talking, than one where I was worrying every five seconds about who was going to knock the drink out of my hand. However, as stated in Bell and Sethares’ theory, if I had fun, I would go back. If I didn’t, I wouldn’t.
Although Bell and Sethares’ strategy makes it more difficult to predict human behavior, I think the strategy itself is used more commonly than strategies like Arthur’s. However, when choosing where to go on a given night, I usually weigh the crowdedness of a bar, and how much fun I had at the bar previously equally.

Taylor Bryan
Question 1

Surowiecki's concept of a "central planner," (87), to control crowds within a given establishment represents an idea that is fundementally flawed as it fails to take into account people's personal feelings. If some authority figured monitiored the crowd by systematically refusing people, said people are sure to walk away with a feeling of rejection that will ultimatly reduce their opinion of the establishment for the worse. Obviously, Surokiecki accounts for this factor, stating "although this solution makes sense in theory, it would be intolerable in practice." (87). While both Arthur and Bell and Sethares' solutions make sense in limiting the overcrowding of the bar, I feel that both fail to take into account a myriad of other factors that influence where one decides to spend their time and money. Even if one accepts the assertion that everyone has fun if the bar is less than 60% full, there are still serious flaws with both theories. Arthur's experiement hinges on individuals making their decisions based off of statsitical data on the crowdedness of a bar on previous weekends. In using data to determine whether or not to attend a bar, Arthur completely negates contributing factors such as special prices, holidays, special events, and season. Say, for instance, a bar hosts a live band certain weekends throughout the year. In looking at the numbers, which would be very high for that weekend, one is unlikely to find an accurate prediction of nights when no special events exist. If one chooses to stay home because they incorrectly think the bar will be crowded, the bar loses money and the person does not have fun. Althernatly, if a person chooses to attend an event because numbers the week before were lower, they are likely to be disappointed at finding a crowded bar. Bell and Sethares's theory likewise has several flaws. In their experiement, Bell and Sethares's reliance on people's previous experience at the bar seems like an excellent means of determining whether or not to go. However, if one does not enjoy themself one weekend because of the crowd they were unlikely to return the next week. Unless the experiment was held in a location with only one bar, people would quickly find new places to frequent. People generally choose to go out before they firmly decide on a location. If one planned to go out and found their favorite venue to be crowded, they are more than likely to find a new place and, if they enjoy themself, to keep going there in subsequent weekends. Additionally, under this plan, the bar tended to develop regulars, a situation that benefits that group but harms others. If a bar has a significant regular crowd they are more likely to socialize among themselves and be less welcoming to outsiders. Once this group of regulars had been established, it would become increasingly difficult for new people to attend the bar and enjoy themselves. If I had to choose between the two options for my favorite location, however, I would choose Bell and Sethares's method. When I do choose to go to a bar, I want to be around people who are having fun and under their system it seems far more likely that people will be enjoying themselves often.

Megan Quigley—Question 2
As a consumer, my first instinct is to say yes, movie theaters should base their pricing on the economically-sensible system of supply-and-demand because it would save me money if I saw the poorer quality or “second rate” films, right? However, on second thought, I don’t want movie theaters to deem which movies are “good” and worth more money to see and which are “bad;” I’d rather decide for myself. This topic plays into the larger debate of knowledge management, raising the question of who would make the decision of what movies are good or bad films. And, also, how do you determine how much to reduce the price of tickets, would there be a set scale of declining prices based on movie quality, the worse the movie the cheaper the ticket? Or the longer the movie was in theaters, the cheaper it would become week by week? Would all films be priced the same on their opening weekend, and based on its performance then the ticket price would be adjusted? Or would pricing be solely based on critic review and how many stars a film received?

Since this supply-and-demand option of profit maximization is so subjective in the movie world, I understand why theaters wouldn’t want to make that decision and receive the wrath of production studios or movie-goers passionate about the film deemed “second rate,” especially if theaters make most of their money of off concessions anyways. And as Surowiecki points out, convention is the standard in this situation, “so the practice seems only natural” (98-99). Many people have probably never questioned the convention of the movie theaters’ business model, and I have never even thought about how it is so unlike all other business practices until this book. However, I disagree with the theaters’ excuse that moviegoers don’t care about price, because obviously consumers do care, especially in this current economic situation, and many people will resort to waiting a couple months for the movie’s release on DVD.

Although movie theaters “deny the law of supply and demand” as Einav and Orbach stated, and have “uncoordinated themselves with moviegoers” according to Surowiecki, this conventional system obviously still works as movie studios still pump out movies and consumers make box-office sellout weekends possible (101). The theaters are happy that they continue to make money, and movie goers still pay to see movies, whether they are first or second rate, they can decide for themselves.

Kara Williams
Question 2

Yes, I do believe movie theaters should price movies according to demand and they can determine the demand after the first weekend the film is released. Usually a film will only be a success profit-wise if it is in the top 3 grossed films out of all others released during the same weekend. So if the film is not in the top 3 of its released weekend then it should be marked down half off the original ticket price. Given the Surowiecki’s example of department stores marking down clothes, I think movie theaters would have a valid reason for marking down films. If film studios become annoyed then theaters could make the offer to negotiate a higher percentage of box-office revenue than the current 25 percent, which would not help the public, but it would be a compromise for the theaters to give, that is if they are afraid of the big studio executives. Theaters that are commercial chains such as Regal Entertainment Group (551 theaters in 39 states) and Cinemark USA (306 theaters in 50 states)— these are the top two chains in North America (—so one would think that the film studio would be doing themselves harm financially if they did not comply with any changes movie theaters made. Also, if movie theaters did make any changes in pricing then the studios would have to continue to submit their movies because theaters are the only outlet for them to make money on their movies being viewed. Just as clothing designers continue to send their clothes to department stores, even though they know their clothes are mark down, they continue because they'd rather have their clothes in the store and being sold for some profit rather then none. The same discount approach should apply for movie studios and theaters.

Further, given wide screen HD televisions becoming more and more common in households and the $1 billion Americans are spending on rentals than movie tickets, and now after reading Surowiecki’s analysis, theaters seem kind of naive to me to not base ticket prices by demand/popularity. Thirdly, Surowiecki says that theater owners “worry that marking down movies would confuse customers,” well I’m not disagreeing with the author because the statement may be true, but what I disagree with is the point the statement makes—that consumers are stupid?! If ticket prices were priced differently back in day when Hollywood use to acknowledge their B-rated movies and people understood that if a film was priced more than it was considered better quality, then why would theaters think people now would be confused if they were back then? If they market it then people will understand; it would even be good PR for them. I think that if theaters don’t start adapting the laws of demand then in years to come they may possibly be the ones asking for a bailout (just a thought).

Caitlin Laverdiere
Question 5

In a competitive market, consumers pursuing their own self-interest benefit the society at large. This capitalist ideal does not seem to align itself with the ideas of trust and reciprocity that Surowiecki attributes to the success of our economy and social interaction. As such, it does not seem credible that capitalist markets intrinsically foster “trust and fairness.” When individuals are not obliged to cooperate fairly due to kinship ties or cultural obligations, the incentive to act in ones own self-interest is the rational choice – free riding maximizes your benefit from the good or service by minimizing the cost you personally have to contribute. However, in terms of cooperation problems, we see the benefits of reciprocity. Robert Axelrod proposes that repeated interactions encourage people to cooperate, which lead to the socially optimal outcome where both individuals contribute. He states, “The foundation of cooperation is not really trust, but the durability of the relationship” (117). Their reputations are on the line, and they understand that their repeated cooperation will benefit them more in the long run. Thus, trust is not at the heart of their decision; it is simply a means to achieve a greater social benefit from which their personal benefit is maximized. Robert Write acknowledged that “over time, we have learned that trade and exchange are games in which everyone can end up gaining” (118). Trusting that others will adhere to this idea is a secondary outcome, not a direct result of capitalist behavior.

I think dwindling personal interaction was inevitable in the face of a growing economy and an increasingly heterogeneous population. Reliance on cooperation in order to achieve socially optimal outcomes resulted. This idea also relates to the World Wide Web. I don’t think trust is implicit in the context of the internet. In fact, I would say the internet fosters an extreme degree of free riding. It was founded on the idea of reciprocity – I upload something for your enjoyment, you upload something that someone else will benefit from, and that person in turn will continue the pay-it-forward philosophy – but the chain of reciprocal exchange is interrupted constantly. People turn to the internet as a source of convenient and easily accessible information. We see the effects of cooperative exchange, however, through websites such as eBay, Craig’s List, and any other online shopping exchange. This mode of digital communication and exchange of goods and services has become ingrained in our culture, and the cooperative understanding that holds in a capitalist market holds true in the digital realm as well. However, I am hesitant to attribute the depersonalized, digital interaction of the internet, or the regular interactions of the capitalist market, to implicit trust. I think people understand the benefits of following through on their commitments, and wish to maximize their own personal benefits through trade, which motivates them to engage in cooperative interaction.

Rachel Burch
Question 1

The idea of some type of crowd control for public places like bars and restaurants is, in theory, a great idea. Keeping a place at the right level of people, not too crowded, ensures a happy outcome for the customer, with a guarantee that that patron will come back. When places become too congested, people often decide to leave. Such is certainly the case here in Blacksburg. Once the school year starts up again and over 30,000 people move back into this small town, places of regular visit, like the bars, become much more crowded. Friends and I will often leave a place once it becomes way too crowded, and find somewhere which much more room to breath.

This idea of an “all-powerful central planner” is too regulatory for this country. Most of us agree that keeping the government out of our personal affairs is necessary. Do we really need the state telling us which nights we can go out, and to which bar? Sounds kind of like something out of 1984. The studies conducted by both parties, Arthur and then also Bell and Sethares were great attempts at finding a solution. They each approached the question from a different angle, looking at it from a crowd perspective or an independent perspective. In the end both studies came up with relatively the same percentage that people feel comfortable with at a public place like the bar. I agree that somewhere around 60% is a comfortable amount of people to feel ease at the bar, to not feel too crowded or overwhelmed. For me, and most of my friends, I feel that both perspectives go into my head when deciding where to go for the night. If the bar is going to be extremely crowded, I may try it, but ultimately decided to go elsewhere. Also, if last weekend I had a difficult time being served, or were constantly being run into, meaning my experience that night was all around bad, I would think twice about returning the next weekend.

Ultimately, having some type of crowd control that says when someone can and can’t go where they please is not something we value in this country. Instead, we’d rather deal with the inconvenience of a crowded place, and complain about it. We want that freedom of choice over comfort from regulation any day.

Jessica Razumich
Question 2

I agree with Surowieki’s analysis when he states on page 99 that “just as retail stores mark down inventory to move it, theaters could mark down movies to lure more customers.” I agree with this statement because I can relate to it, I am one of those people who will not shell out 8 dollars to see a movie if it looks iffy, but will pay 4 dollars to rent it and watch it at home. However, I do understand the theaters concern with alienating the movie studios. It’s a business, and just as you wouldn’t want to do something to upset your boss, neither does the theater. It’s a tough situation, but I think that movie theaters should make prices high during opening weeks and as time goes on lower the prices of the movies. I mean, if there are die hard fans of actors, they will be willing to pay the extra money to see the movie on opening day. For example, Harry Potter fans, Star Wars fans, and so forth. I believe that the businesses need to start taking the public into consideration, especially during economic times like these.
So over all in essence, I do believe that movie theaters should price movies according to demand; however, I also feel that they should take into consideration the demand for the movie. In other words if it fails to be as popular as they though then the ticket price should be reduced.
In respect to the fact that Americans spent $1 billion more on video rentals than on movies in the theater, I think that says it all. The theaters are losing business to rentals. The fact that the technology of television is excelling and images are clearer and the sound is better, makes the consumer question their need to spend more money at a theater when they can stay in the comfort of their own homes.

Jenny Milne
Question 2

Thinking about this question, and this portion of the text, really hit me. I understand the idea of supply and demand. Thats how we pay for most of our daily items, milk, oil, bread. Everything in our life is based on supply and demand. The idea of pricing a movie based on this common method makes sense. I can understand, especially in an industry that is always trying to find a way to make up for the money lost due to pirating and streaming/stealing movies from the internet. In an economy like this, few people are willing to spend the already sky high prices of movie theaters. Therefore, it might be a good idea, because people would go see the cheaper movies, which would then raise the ticket prices for that, but lower the ticket prices for the movies that were promoted well.

This idea makes sense, it would allow for more price control done by the movie-goers desires, rather then the corporations. I'm in the middle of this theory, however, if it came down to it, I would choose not to have prices fluctuate. I hardly ever go to movies, I consider them a treat, therefore when I do go, I don't want to see whatever the cheapest movie is, I'd like to see the movie that I want to go to.

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