El Farol bar problem
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The El Farol bar problem is a problem in game theory. Based on a bar in Santa Fe, New Mexico, it was created in 1994 by Brian Arthur.
The problem is as follows: There is a particular, finite population of people. On Thursday night, all of these people want to go to the El Farol Bar. However, the El Farol is quite small, and it's no fun to go there if it's too crowded. So much so, in fact, that the following rules are in place:
- If less than 60% of the population go to the bar, they'll all have a better time than if they stayed at home.
- If more than 60% of the population go to the bar, they'll all have a worse time than if they stayed at home.
Unfortunately, it is necessary for everyone to decide at the same time whether they will go to the bar or not. They cannot wait and see how many others go before deciding to go themselves.
The significance of the problem is that, no matter what deterministic method each person uses to decide if they will go to the bar or not, if everyone uses the same deterministic method it is guaranteed to fail. If everyone uses the same method, then if that method suggests that the bar will not be crowded, everyone will go, and thus it will be crowded; likewise, if that method suggests that the bar will be crowded, nobody will go, and thus it will not be crowded.
In some variants of the problem, the people are allowed to communicate with each other before deciding to go to the bar. However, they are not required to tell the truth. A generalized version of the El Farol bar problem is known as the Minority Game.
[edit] Reference
- W. Brian Arthur, “Inductive Reasoning and Bounded Rationality”, American Economic Review (Papers and Proceedings), 84,406–411, 1994.
