Friday, August 10, 2007

Rolling Chair Prisoners' Dilemma

The Academy of Management conference I just attended was held in Philadelphia. Knowing how important it is for a researcher to be familiar with statistics and probability, I felt it would be irresponsible of me not to take advantage of the opportunity for an in-depth study at the casinos of Atlantic City located just an hour away.

One of the more unique aspects of Atlantic City is the availability of rolling chairs to transport you along the boardwalk (see a picture of a rolling chair here). I expected the price of transportation to be relatively low - it doesn't seem like it would be that hard to get into the business (low barriers to entry in econ-speak). Just buy a couple of chairs and hire some strapping young lads to push them. I expected the operators would be caught in a classic prisoner's dilemma in which the operators continue to undercut each other's prices until economic profit is driven down to marginal cost (economist's hallowed equilibrium). Instead, prices seemed relatively high, although I have no idea of the costs of rolling chair operation, so I can't really comment on whether prices are at a profitable level.

What's the solution to the prisoner's dilemma in this case? Government regulation. The city of Atlantic City regulates both the number of rolling chairs and the prices that they charge. So here's one case where regulation might actually benefit business - it can be one way to escape the prisoner's dilemma.

And, for those of you who might be interested, the casinos gave me a hard lesson in statistics and probability during our visit. Did someone say business expense?


  1. Seems more like regulation created an environment conducive to or analogous to cartel activity. It may help business, but this is necessarily at the expense of the consumer and/or local taxpayers.

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