Envy, the Deadliest of Sins

Envy, the Deadliest of Sins^[11]

The goal of business is profit maximization, not making more money than your competitor. To maximize your profit in a repeated prisoners’ dilemma, you must cooperate with your competitor. If both players’ objective is a higher payoff, however, then cooperation is unachievable since then only one can win.

Anything that helps your opponent in chess hurts you because chess is a fixed-sum game. Games like chess, football, and poker are called fixed-sum because whenever one person wins, another necessarily loses. Consequently, you should never bother cooperating with your opponent in a fixed-sum game because your interests are diametrically opposed. While business games usually aren’t fixed-sum, they can be transformed into fixed-sum games by envy. If both players perceive that their opponent’s gain is their loss, then their game will always be fixed-sum. Since in a fixed-sum game there is no benefit to cooperating, envious players in a repeated prisoners’ dilemma game will always be trapped in the mean, mean outcome.

Just as you should be less trusting of smokers, you should also be wary of envious players. Consider how envy affects the cost/benefit calculation of optimal betrayal. The benefit of betrayal is a higher payoff this period while the cost is a lower payoff in future periods. For envious players, however, a further benefit of betrayal is that your opponent gets a lower payoff. Since envious players get a higher benefit from betrayal, they are more likely to engage in it. Therefore, you should be less trusting of envious people and others should have less trust in you if they perceive you as envious.

^[11]See Axelrod (1984), 110–113.