Game Theory

One of the most interesting topics in Economics has to be the Game Theory. It allows us to see how people's choices are dependent on choices other people make and how people can benefit from cheating in collusions . Today, a story I read in a children magazine as a seven-year-old boy, which incidentally showed people cheating in a collective order(?) suddenly came back to my mind. I would like to narrate it to you all. There was a Raja who was on a trip throughout his kingdom. Midway in the trip, he came across a village whose residents complained that the appointed tax collector was very cruel. The Raja was very wise; he replied that he will look into the matter but would first like the villagers to do a favor for him. He had always wanted to create a pond of milk. Since the village was known for healthy cattle, the Raja said that he wants everyone in the village to put one cup of milk in the dried pond of the village overnight, so that the next day, the dried pond be changed into a milk pond. The villagers went back into their home. Each villager independently hatched a plan that since every other villager is going to put in milk, he could put in a cup of water and nobody would know. So, each villager, thinking that he is cleverer than others and can get away with this cheating, pours a cup of water in the pond at night. The next day, the Raja summons everyone at the pond and the villagers are horror-struck to find a pool of water. The Raja remarks that since all of the villagers are such cheaters, it is only appropriate that the tax-collector is so harsh.
This story shows that it is important to thoroughly analyze the pay-offs of other people before making any decision and that the Game Theory does not account for such clever a people as the Raja.