Diner’s dilemma

5th April, 2008

Dear Economist,
When invited to dinner, I am often unsure whether to bring good wine. If I take an expensive bottle, it may go unappreciated – either through lack of appreciation or people not seeing what I’ve brought. Taking plonk means I can get a free ride on others’ largesse, but my tightfistedness could get rumbled – what do you recommend?
Alex, Geneva

Dear Alex,

A simple bit of game theory will produce the optimal strategy. If this is a repeated interaction with people who know their wine, it’s best to produce a good bottle. Reciprocity for your generosity will make this a good approach in the long run.

You will need to work out whether your dining partners do indeed understand wine. That is easy enough. Bring them something decent and see if they remark upon it. Then observe what they bring the next time you dine together. If your dinners are isolated invitations, or your hosts know nothing about wine, you may cheat with impunity. In short, vary your actions according to circumstance.

There is a deeper point here, though. You need to establish what is giving your fellow diners their utility – good wine, or the pleasure of one-upmanship? My fellow columnist, the economist John Kay, points out that economists “win” gift exchanges by spending less than everyone else, but most people “win” gift exchanges by spending more.

If your fellow diners are economists, then my analysis will apply. Otherwise, as the sole economically minded diner, make sure your wine is a little less assuming than everyone else’s. Everyone is happy, you save money and they feel smug. The moral: never forget to look for gains from trade.

Also published at ft.com.

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