The source is here. I'll restate the problem in simpler terms:
You are one of a group of 10 people who care about saving African kids. You will all be put in separate rooms, then I will flip a coin. If the coin comes up heads, a random one of you will be designated as the "decider". If it comes up tails, nine of you will be designated as "deciders". Next, I will tell everyone their status, without telling the status of others. Each decider will be asked to say "yea" or "nay". If the coin came up tails and all nine deciders say "yea", I donate $1000 to VillageReach. If the coin came up heads and the sole decider says "yea", I donate only $100. If all deciders say "nay", I donate $700 regardless of the result of the coin toss. If the deciders disagree, I don't donate anything.
First let's work out what joint strategy you should coordinate on beforehand. If everyone pledges to answer "yea" in case they end up as deciders, you get 0.5*1000 + 0.5*100 = 550 expected donation. Pledging to say "nay" gives 700 for sure, so it's the better strategy.
But consider what happens when you're already in your room, and I tell you that you're a decider, and you don't know how many other deciders there are. This gives you new information you didn't know before - no anthropic funny business, just your regular kind of information - so you should do a Bayesian update: the coin is 90% likely to have come up tails. So saying "yea" gives 0.9*1000 + 0.1*100 = 910 expected donation. This looks more attractive than the 700 for "nay", so you decide to go with "yea" after all.
Only one answer can be correct. Which is it and why?
(No points for saying that UDT or reflective consistency forces the first solution. If that's your answer, you must also find the error in the second one.)
Yes, but
... is wrong: you only get 1000 if everybody else chose "yea". The calculation of expected utility when tails come up has to be more complex than that.
Let's take a detour through a simpler coordination problem: There are 10 deciders with no means of communication. I announce I will give $1000 to a Good and Worth Charity for each decider that chose "yea", except if they all chose yea, in which case I will give nothing. Here the optimal strategy is to choose "yea" with a certain probability p, which I don't have time to calculate right now.
But anyway, in coordination problems in general, the strategy is to find what the group strategy should be, and execute that. Calculation of expected utility should not be done on the individual level (because there's no reliable way to account for the decisions of others if they depend on yours), but on the group level.
The expected value is $1000 (10 * p - 10 p^ 10). Maximums and minimums of functions may occur when the derivative is zero, or at boundaries.
The derivative is $1000(10 - 100 p^ 9). This is zero when p = 0.1^(1/9) ~= 0.774. The boundaries of 0 and 1 are minima, and this is a maximum.
EDIT: Huh. This simple calculation that mildly adds to the parent is worth more karma than the parent? I thought the parent really got to the ... (read more)