Choosing the right internet offer

In this article we will explore further how multi-person situations with either-or choices can be represented on a chart. We’ll consider situations where there are only two options to choose from and where other people’s choices affect our situation.

So, let’s see how a different situation may be presented on such a chart.

Internet offer

A group of students living together have to pay for the Internet and until now they’ve paid for it individually, 10 EUR per month. There is a new offer in their neighbourhood and they could get a free router and share Internet connection. Such an option costs 22 EUR per month and as it is an offer from their previous contractor, they don’t have to pay any additional costs for switching. If they decided to choose the new offer, Wifi would be an excludable good, as people have to know a password in order to use it. So, those who decide to switch to a new offer and share the password can exclude the ones who don’t chip in.

The payoffs chart for such a situation is presented below.

Chart 1: Internet offer

Individual cost is steady, independent on how many people chip in for the shared connection. Let’s look at the RED LINE – obviously, the more people share the cost of the new offer, the cheaper it is for each of them.

Now, let’s look at the relation between the lines in different possible scenarios in order to identify the best responses for a player to different combinations of other players’ choices. We’ll be looking at situation from a single person’s perspective (e.g. Diane’s perspective). This is what can be concluded:

• If nobody wants to pay together, it is better also not to pay (blue line above the red one, -10 EUR higher than -22 EUR).
• If one person wants to pay for the shared option, Diane can either pay 10 EUR individually or pay 11 EUR so it’s still better to stick to the individual option.
• And when two or three people decide to pay together with Diane, she would be better off paying than not paying (red line above the blue one, it’s better to pay 7,33 EUR and even better to pay 5,5 EUR than 10 EUR).

This chart illustrates situations where we need some critical mass of people in order for a certain option to become more attractive. And when this critical mass is reached, it becomes a more attractive option for each person to pick that option. So – if the critical mass is in fact reached – this ‘new’ option is chosen by everyone.

Festival

The same chart might relate to a social gathering, like a local festival. If you stay at home, your payoff stays the same, while if you decide to go to such an event, the more people attend it, the more you enjoy it (chart 2).

Chart 2: Local festival

In the case of the housemates and the Internet offer, it’s quite probable that they can coordinate their actions and agree to pay for the new offer together. In the case of bigger groups, it may not be so easy to reach such a level of engagement when it becomes beneficial for everyone to change their initial behaviour. In the case of a local festival a lot depends on the expectations of the people. It’s a kind of self-fulfilling prophecy. If people expect that nobody (or very few people) will go to the festival, they won’t go themselves (and the result will be that they all stay at home). If people expect that a lot of people will go, they will want to go too, they will go, making possible the result they anticipated.

Think how important it is for the organisers to make people believe a lot of people will come and how social media are used to make it easier for people to decide if they want to go.