Dinner dilemma – What is it, definition and concept | 2022

The dilemma of the dinner or dilemma of the unscrupulous diner is a variant of the prisoner’s dilemma with «n» players that aims to demonstrate that the decision considered optimal is not always the most beneficial.

We are facing a situation that has been studied in game theory. In this way, once again, it is shown that the option that seems most intuitive does not have to be the most successful for everyone. Therefore, you have to pay attention to detail.

Bastiat, French economist and philosopher, coined a phrase that sums it up excellently: in economics, what is most harmful is what is not seen. Because, in the end, what might seem like a good idea turns out to be a terrible decision. Therefore, it is best to know what it consists of.

Dinner Dilemma Run

A number of people gather for dinner. When they go to order, they must choose between a cheap or expensive dinner. Since they are going to pay equally, most think of ordering the expensive dish so that this small difference is blurred among all, believing that others will order the cheap one.

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However, Gneezy, Haruvy, and Yafe (2004) used game theory to conduct a field study of the dinner dilemma. They found that the subjects of the experiment spent more when a common expense was anticipated. Therefore, what happens is that the majority ask for expensive dinner.

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Thus, this socialization of possible losses ended up affecting everyone’s bill, which would be higher. In short, what intuition tells us, which would be to order expensive dishes, does not seem like the best logical decision, since others think the same and in the end everyone pays more.

economic reasoning

This situation, which draws from the principles of the prisoner’s dilemma, can be explained from the economics of utility. A good or service has a utility perceived by the consumer and this depends on several factors. One of them is, precisely, subjective, the perception of the subject.

We must bear in mind that, in the end, everyone will have paid an extra cost and some were not interested, they only did so because everyone would pay equally. Therefore, the overall perceived utility will be lower for each of the members than if each paid their own.

Something similar can happen in a country. If we believe that the global bill is going to be paid equally, it is most likely that everyone involved will tend to spend. This, in turn, is related to the marginal propensity to consume, which will be higher if someone else pays the bill.

How to face the dilemma

The solution is simpler than it seems, above all, knowing how it works with the appropriate economic and financial education. In fact, it precisely consists of doing the opposite of what we intuitively think, but above all, we must study the situation.

Let’s think of dinner as our own domestic economy. First of all, unnecessary spending is always avoidable, as anyone who knows the rat race knows, a situation in which we never have enough. It does not mean that we do not give ourselves a treat, but, at least, not to do it when we all pay for it.

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Secondly, the accounts are always clear. It is best to know in advance how each of us is going to finance the expense. We must bear in mind that this dilemma is based on psychological effects that seem to be widespread. In this way, as we will see in the example, if we consider that everyone is going to pay, the tendency is to order the most expensive.

Dinner Dilemma Example

Imagine five friends meeting for dinner. They decide to pay everything equally. The restaurant offers two dishes, the cheap one at $30 and the expensive one at $50. The situation that everyone thinks is that, at most, one will order the expensive one and the rest the cheap one, therefore, they will each pay 34 dollars.

But it happens that the reality is different, one only asks for the cheap one and the bill shoots up to 46 dollars. Apparently, everyone thought the same and since it would be paid in equal parts, almost everyone chose the expensive one. The image shows the different options.

But there is more, if everyone ordered the expensive one, the extreme situation, it turns out that everyone would pay $50, but they would have had a better dinner, or so we might think. Well, not exactly, the dilemma of the dinner shows that, in reality, if they had gone alone they would have ordered three cheap dishes and two expensive ones, the first would pay $30 and the second $50 and it would be the fairest situation.

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