At the apartment block where I used to I live, I once parked in another tenant’s car bay for a brief period. The tenant called the wheel clampers and landed me with a $120 (£69) fine, despite the fact he doesn’t have a car and there were 30 spare car bays, and despite knowing that the car belonged to me. Up to that point I had had no run-ins with this person.
The tenant gained nothing from this except my bad opinion, and I was $120 worse off. Why did he not either ignore my car, or come up and knock on my door and say: “Look, I’ve got these people on the phone who will clamp your wheels unless you persuade me otherwise.” He could have had a few bottles of beer out of it. But he didn’t. So what was the rational reason behind his action?
You are right to be puzzled. Clearly, this neighbour did not maximise the value of his bargaining position in the narrow situation you describe. Still, I think there is a certain logic to what happened.
Game theory is the economist’s tool of choice to analyse what happens when two or more people have to negotiate, co-operate, compete or otherwise engage with each other. The essence of game theory is that each side would expect the other side to anticipate and respond to his likely actions.
Game theory shows that there are times when irrationality (real or feigned) is a highly effective strategy. Someone who seems impervious to logic is someone who also gets his own way a lot. Consider, for example, toddlers, terrorists, bosses, dogs and the late Charles de Gaulle.
Your neighbour may have calculated that by demonstrating a willingness to punish you for no immediate personal gain, he will gain in the long term anyway. Irrational perhaps, but rationally irrational.
Also published at ft.com.