SSPM final game: evolution in the car industry

In this post, I will try to introduce a game that we can play during the final session. The four pitches during class last week showed that it is harder than we imagined to clearly explain a game.

Learning goal:   this game tries to show evolution in a product: will different firms grow into selling the same sort of cars, or will they occupy different niches

Players:

-          Car firms           5 teams of about 3 people present the car firms

-          Consumers        rest of the group is individual consumer

-          Public opinion   the ‘game masters’ draw cards that influence the public opinion

Starting point:

-          Car firms start with the table below – but one of the categories get an extra point

	Status	Performance	Maintenance	Fuel saving	New technologies
Round 1	3	3	3	3	3
Round 2	...	...	...	...	...
Round 3	...	...	...	...	...
...

-         In each his round, consumers choose a car from the table that is displayed in the classroom:

Round 1	Status	Performance	Maintenance	Fuel saving	New technologies
Firm 1	4	3	3	3	3
Firm 2	3	4	3	3	3
Firm 3	3	3	4	3	3
Firm 4	3	3	3	4	3
Firm 5	3	3	3	3	4

Next round:

-          Car firms get extra points they can invest, following this scheme:

o   +2          Most cars sold

o   +1

o   0

o   -1

o   -2           Least cars sold

-          Consumers are shown the table for round 2 and make another choice.

Public opinion:

Because I fear that most Industrial Ecologists will probably go for the more sustainable, fuel saving cars, I add an extra dimension which I call public opinion. In every second round the ‘game masters’ draw a public opinion car, that slightly changes the game (like in monopoly). Texts on these cards are:

• The leading firm gets a fine for unfair competition and has to hand in 4 point
•  A crisis occurs, so consumers are likely to go for cars that score on maintenance
• There is a technology break-through, the two firms with the most points invested in ‘new technologies’ get 3 extra points to allocate
• Etc.

After x rounds:

The cars either become more similar or more diverse. This will mimic the process of industrial evolution. Or to be more precise, adaptation to the environment, which is the consumer market in this case. In this game, extinction is defined as not selling any cars for two rounds. Thus, the game shows competition as well.

My only fear is that this game might not be too interesting for the consumer. But, in real life you cannot really 'win' in consuming either.

Comment, 30-12-2014
While rereading this post, I want to make two contributions:

- I did not clearly state what I meant by the 'points' that the car firms could collect in each round. I introduced them to create some sort of financial competition between the firms. Of course, these points are only based on popularity of a car. Also, they do not include the fact that normally cars would be priced differently - in this game every consumer can by any car. The points can be used to invest in some 'traits' or categories, so that the  firms are likely to diverge over time.

- After discussing the 'self-organized' session in class, I think that my game falls short on two points. First of all, the game is very abstract. Consumers are expected to make decisions based on a table with points. A nice addition would be to add a picture of a car to each car type, so that consumers might choose less rational. Secondly, the preference of the consumers in the first round is quite determining for the outcome of the game. To overcome this problem, the random punishments and rewards from the 'public opinion cards' could be more severe.

Solving the tragedy of the commons

Tragedy of the Commons & Industrial Ecology

Last SSPM session, we were confronted with our more evil side. Where we as industrial ecologists tend to see ourselves as moral human beings, conscious of our environment and the people around us, we were proved to be the bad guys ourselves.

In the fishery game, many teams (including mine I’m afraid) played ‘defect’, by fishing more fish than the sustainable amount of four. Within five rounds we had completely emptied the sea. But we did not even defect in a rational way - we went for five fish. The only rational strategy would have been to play 50 in the first round, since we would play a maximum of 8 rounds (so if all teams played ‘cooperate’, we would have caught 4*8 = 32 fishes). Of course, this strategy would only work if the other teams were to go for a more modest start and not empty the sea before us.

In an infinite game, this defect tactic would be completely useless. Nevertheless, human beings do not seem to be very well-equipped to reason on the long run, especially when we consider infinity. A growing population density, combined with the development of international trade, reduced direct feedback loops between human beings and nature. Through the mechanism of competition, human beings are actively encouraged to produce more and therefore to use more resources.

Governance

Vast population growth combined with the increasing depletion of natural resources have lead to degraded ecosystems, for example caused by fishing or deforestation. These problems are often referred to as a tragedy of the commons (Hardin, 1968). The only way to overcome the tragedy of the commons, Hardin describes, is by accepting that complete freedom is a illusion.

Handing over freedom so that we can share common goods in an honest way is fundamental to the way today’s society is organized. We pay taxes (hand over freedom) and in return, the government ensures health care, education, drinking water and clean air. So, to prevent an empty sea, we should implement some form of governance in the fishery game we played in class.

Culture
We started that same lecture by creating an in-group and an out-group. Signalling is one of the main mechanisms that is used in nature to make a distinction between friend and foe, for example with odour or in behaviour (Krebs & Davies, 1997). During the first half an hour of class, students who came in too late were forced to either stand or sit on the table. Clear public ‘punishment’ for their defecting behaviour. By differentiating between ‘accepted behaviour’ (in-group) and ‘alien behaviour’ (out-group), we in fact started to develop a culture. Schein (1968) defines culture as a pattern of shared assumptions, that are in some way formed within a group, if they deal with collective problems. Culture needs to be reinforced, so that it becomes a pattern.

Overcoming the Tragedy of the Commons

So, in order to overcome the tragedy of the commons, we need to establish governance, that is enforced by a culture, or at least the feeling to be part of some sort of in-group, and defecting behaviour should be signalled and actively discouraged.

Therefore, I propose the following measures:

1.       Before the fishing season starts, all ‘team captains’ will come together and seek for common ground

2.       Based on these common values, a cooperation will be established

3.       From each team, 1 member will take place in a cooperation board, which will set up rules

4.       From each team, 1 member will take place in an audit board, they will be paid from general contribution to the cooperation, to ensure their independence

5.       As a fishing boat returns from the sea, it’s catch will be checked, if it’s more than four fish, there will be 2 consequences:

a.       The boat is no longer allowed to use the logo on their boat (signalling defecting behaviour)

b.      The boat is excluded from fishing the next year

The only way in which these measures will work is if ‘defecting’ is not just discouraged by rules, but also by all members of the cooperation. In a cooperation, ‘cooperate’ should be a cultural norm, so that defecting leads to serious social consequences as well.

Relating my solution to Colby’s paradigms, my solution is an example of resource management, in which economic growth should be balanced with natural resources. Even though humans are central in this paradigm, eco-efficiency based regulations prevent ecosystem depletion.

As there is no direct influence from a central government in my solution, the governance type can be characterized as private interest governance (Boons, 2008). In the end, all fishermen are better off with a healthy fish population, so there is a clear common interest. Also, since we are discussing a small community, research has showed that in many regional cases top-down legislation from a central government can have a negative impact (Andersson & Ostrom, 2008), whereas bottom-up governance can be based on extensive local knowledge.

In short, I think all teams combined should start building a culture, in which ‘defecting’ is simply not an option. By creating a cooperation, common ground can become institutionalized and part of the deep underlying assumptions of the fishermen’s culture. A cooperation board can continuously improve rules and regulations and an audit board can actively discourage any ‘defecting’ fishermen. A tight social network can be an answer to the tragedy of the commons.

References

- Andersson, K. and Ostrom, E. (2008). Analyzing decentralized resource regimes from a polycentric perspective, Policy Sciences 41: 71-93.

- Boons, F.A. (2008) Self-Organization and Sustainability: The Emergence of a Regional Industrial Ecology, Emergence: Complexity and Organization 10(2).

- Hardin, G. (1968) The Tragedy of the Commons, Science 162(3859 , Dec. 13, 1968), pp. 1243-1248.

- Krebs, J.R. & Davies, N.B. (1998) Behavioural evology: An evolutionary approach, Blackwell Publishing, Oxford

- Schein, E. (1996) Three Cultures of Management: The Key to Organizational Learning, Sloan Management Review; 38(1): 9-20.

Comment, 30-12-2014
The tragedy of the commons is in fact a collective action problem, where the outcome of individual behaviour is positive for the individual, but negative for the collective if all individuals produce this behaviour. In rereading this blogpost, I feel that I miss some of the complexity of such an issue, as my solution builds on the assumption that, once all fishermen start talking, they will agree on a collective policy.

It may be more realistic to add another governance structure: that of a local or national government. The main governance structure could still be the cooperation board, but the progress of the community should be audited by this local or national government. This will make sure that the fish population remains high on the agenda and it will offer an extra tool to control defecting behaviour within the cooperation.

I feel these two governance structures combined can establish a community in which the fish population will stabilize at a sustainable size.