The Longest Penalty Shot in the World – Common Knowledge

During the final local league soccer game, the starting goalkeeper is seriously injured and the backup (Fernando) must enter the game to face a final-minute penalty kick. Before the shot can be taken, the crowd storms the field and the referee decides to postpone the kick to one week later. The problem? Fernando has all week to think about where the shooter will kick.

In this scene, the team works through the penalty kick scenario. The options available to the kicker are common knowledge among the team. The team knows the kicker prefers to kick right, so the kicker may kick left instead. But the kicker knows that the team knows that and may kick right after all. The team gets frustrated because they soon realize there is a potentially infinite chain of reasoning about what everyone knows.

2023 0

Star Trek TNG — Data Overanalyzes

Data is trying to formulate a battle plan for Commander Riker, but he’s assuming that Commander Riker is rational and knows that Data has analyzed his move. Data takes it a step further and hypothesizes that Commander Riker knows that Data knows that the commander has a battle plan. Full information is a tough assumption about rationality, but bounded rationality lets us assume that people have limitations but still respond to incentives in a predictable way. While perhaps a human failure, most of society does not operate on the same level as Data.

Thanks to Peter Nencka for the clip suggestion!

2018 0

Wolf of Wall Street — Nobody Knows

The efficient market hypothesis states that any available information about a market is already captured in the market price. Matthew McConaughey, in The Wolf of Wall Street, notes that the first rule of the market is that no one knows what is going to happen, especially stock brokers.

2017 0

Friends: They Don’t Know That We Know

When teaching game theory, we inevitably spill into the notion of complete information with they “they know we know” and “we know that they know we know.” Now you can have Friends do it for you:

2015 0