This column is to appear in the Augusta Business Chronicle (July 2000).  Games Economists Play Do you remember the children's game paper, scissors, rock? Two children face each other. On the count of three they either show an open palm (paper), or show the index and middle finger spread out (scissors), or a fist (rock). The rock blunts the scissors' blades and wins. But the paper can wrap up the rock and wins. Yet the paper can be cut by the scissors, so scissors wins. Let us reduce the options to two. Two people show either an open hand (cooperate) or a fist (defect from cooperation). The payoffs from each round of playing are as follows. If both cooperate (open hand), both get 3 points, their reward for cooperation. If both defect (fist), they get 1 point each, their punishment for mutual defection. If one defects while the other cooperates, the cheater gets five points for following the temptation to defect while the cooperator gets 0 points, the sucker's payoff. If you play this game repeatedly, which strategy would garner you the highest number of points and make you the overall winner? To find out, Robert Axelrod, a political scientist at the University of Michigan, asked experts in game theory (the theory of strategy) to mail in computer programs. The programs could for example be programmed to always defect or defect 3 times in a row and then cooperate twice and so on. It was up to the expert to program a strategy that the expert thought would win the overall tournament against the other programs. In all, fifteen programs were submitted and pitched against each other. The winner? A program called tit-for-tat submitted by Anatol Rapaport, a psychologist at the University of Toronto. What strategy did tit-for-tat follow? In round one, tit-for-tat starts off by being nice (cooperate) and thereafter simply imitates the other player's previous behavior: if you cooperated in the last round, I will cooperate in the present round; if you defected in the last round, I will defect in the present round. Playing around with the programs, Professor Alexrod made some remarkable discoveries. For example, when tit-for-tat played tournaments against programs that in their majority were "nasty" (i.e., they tended to defect frequently), tit-for-tat still won the overall tournament. In another experiment, successful programs were permitted to multiply (have "children") while unsuccessful ones were removed from future tournaments. In the evolving game ecology of 1,000 generations (1,000 tournaments), tit-for-tat multiplied rapidly and was -- without a single exception -- always the highest scoring program. When Robert Axelrod published his findings, he asked experts to mail in more programs. This time, he received 63 programs. Again, tit-for-tat won! Puzzled, Axelrod tried to understand what made tit-for-tat so successful and came up with four major insights: 1. Don't Be Envious. If the other player succeeds, don't envy the success by adopting strategies aimed at thwarting the other player. Instead of undercutting the other, mind your own business. 2. Don't Be The First To Defect. Be nice and start with a cooperative move. Axelrod found that in the first tournament of 15 programs, the top eight contenders all were nice strategies that readily forgave the other player one or more defections. Even in the second tournament of 63 programs, fourteen of the top fifteen were "nice" (the "nasty" exception scored eighth). 3. Reciprocate Both Cooperation and Defection. If it becomes common knowledge that you always cooperate, you set yourself up for continuous exploitation. Thus, it is important to acquire a reputation that you will invariably defect if the other player defects. The other player thereby learns that you can be suckered only once, and that it pays more to cooperate with you. 4. Don't Be Too Clever. In Alexrod's experiments, complex programs did no better than simple programs. Indeed, tit-for-tat was one of the simplest programs submitted. In sum, envy doesn't pay, be nice, be forgiving while being firm, and be uncomplicated and straightforward. Your mother could have told you that -- but here you have it from the economist's pen. Dr. J. Brauer is Professor of Economics at Augusta State University's College of Business Administration. He can best be reached via his web site (http://www.aug.edu/~sbajmb).