People are irrational. RAND’s Merrill Flood was not the first to realize that, but he was one of the first to analyze that irrationality with game theory. Beginning in 1949, Flood sought out interesting games, dilemmas, or bargaining situations in everyday life. He asked the people involved how they had decided what to do. Were they (unconsciously!) using the von Neumann-Morgenstern theory, the Nash equilibrium theory, or something else entirely? Flood also accumulated data on how departing RAND colleagues sold or gave away their belongings (many stayed just for the academic summer break). One consultant donated the leftovers of his summer in Santa Monica – “a fifth of a fifth of Scotch whiskey, half a box of prunes, seven eggs, a dilapidated suitcase, some kitchen utensils, and odds and ends” – for an experiment on the mathematical “fair division” theory of economist Hugo Steinhaus. Flood reported several of these investigations in “Some Experimental Games,” a RAND research memorandum dated June 20, 1952.
William Poundstone, Prisoner’s Dilemma, Doubleday, NY 1992, p. 101.