Trapped by a prisoners dilemma

Royal Crescent Bath

Royal Crescent Bath

I am lucky to live in the beautiful city of Bath in the south-west of England. Bath is renowned for its Roman Baths and Georgian architecture but its council has fallen into a prisoners dilemma.

The city has three main recycling centres to encourage people to recycle as much waste as possible. At the moment anyone can use the centres whether they live in Bath or not. Equally anyone in Bath can also use a centre in another city if they want to. I sometimes use a centre in another area because it is on my way to work.

I don’t know how much they spend on the recycling service but let’s assume it is £100,000 (it’s always good to use a nice round number!).

If 10% of people come from other areas and they are banned from using the sites then the cost will fall to £90,000, but the council will now have to pay the cost of monitoring who is using the sites. Let’s say monitoring cost is £5,000, then the cost for the council becomes £95,000. The council has saved £5,000 by stopping people from other areas from using the service. The neighbouring council now has more people to deal with because no-one from their area can go to Bath anymore. Their cost goes up to £110,000.

This is fine for Bath until the neighbouring councils do the same thing. When that happens then the 10% of people who were going from Bath to another area (like me) can only use the Bath centres. This now adds £10,000 back onto the Bath cost bringing it up to £105,000. This is the original cost of the service plus the cost of monitoring who is using it.

Showing the game in a grid looks like this:

Accept others Residents only
Accept others (£100,000; £100,000) (£110,000; £95,000)
Residents only (£95,000; £110,000) (£105,000; £105,000)

We can see that this is a classic prisoners dilemma.

If the other council is accepting others then Bath is better off if it restricts its service to residents only (a cost of £95,000 rather than £100,000).

The alternative is that the other council limits its service and then Bath’s best response is also to limit its service (a cost of £105,000 rather than £110,000).

Either way the best response is to limit the service even though this leads to a worse result for both than if they both kept an open service.

That’s explains why they have decided to restrict the service to residents, but why has this only just started to happen when the service has been running for years?

The answer is because the councils have changed the game they are playing. Before the ‘Great Recession’ the councils based their service around maximising the amount of waste that is recycled. When this is their priority then they have no reason to restrict who uses the service, all that matters is that the waste is recycled.

Now the council’s are playing the game using money as the measure of success. This has changed the game into a prisoners dilemma and the councils are now trapped.

This is a real life example where changing what is important in the game has changed the outcome.

What you measure matters because it changes the game

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