The Bar That Everyone Goes To

The situation

There's a popular bar that's fun only if fewer than 60% of the regulars show up. Too crowded, it's miserable. Too empty, it's not worth going. You're a regular with no way to coordinate with others before deciding each week.

Background

Brian Arthur's El Farol Bar problem demonstrates reflexivity in prediction: if everyone uses the same reasoning to predict attendance, they all make the same decision, which produces attendance that falsifies the prediction. Good individual predictions require heterogeneous reasoning, and the system as a whole cannot be solved by any single strategy.

What this reveals

Reflexivity: shared predictions change what they predict

The El Farol problem shows that when all participants use the same reasoning to predict the behavior of a system, their predictions become self-defeating. If everyone predicts the bar will be empty and goes, it becomes crowded. If everyone predicts it will be crowded and stays home, it becomes empty. The only stable outcome requires heterogeneous predictions, which means some people have to be 'wrong' on purpose. Any individually rational, widely-shared strategy destroys itself.

How to counter it: When you're acting on a prediction, ask: is this prediction private information or widely shared reasoning? If everyone else is making the same prediction, your prediction is already priced in, and acting on it is likely to be wrong in exactly the way the reflexivity predicts.

A question to sit with

What's a decision where your 'best prediction' might be the same as everyone else's? What would it look like to bet differently?

Frequently asked questions

What game theory concept does The Bar That Everyone Goes To illustrate?

The Bar That Everyone Goes To illustrates Congestion, Reflexivity. When a prediction is widely shared, using it changes the thing being predicted.

What is the situation in The Bar That Everyone Goes To?

There's a popular bar that's fun only if fewer than 60% of the regulars show up. Too crowded, it's miserable. Too empty, it's not worth going.

What does The Bar That Everyone Goes To reveal about how people decide?

Reflexivity: shared predictions change what they predict. The El Farol problem shows that when all participants use the same reasoning to predict the behavior of a system, their predictions become self-defeating. If everyone predicts the bar will be empty and goes, it becomes crowded. If everyone predicts it will be crowded and stays home, it becomes empty. The only stable outcome requires heterogeneous predictions, which means some people have to be 'wrong' on purpose. Any individually rational, widely-shared strategy destroys itself.

How do you avoid the trap in The Bar That Everyone Goes To?

When you're acting on a prediction, ask: is this prediction private information or widely shared reasoning? If everyone else is making the same prediction, your prediction is already priced in, and acting on it is likely to be wrong in exactly the way the reflexivity predicts.

What is the research behind The Bar That Everyone Goes To?

Brian Arthur's El Farol Bar problem demonstrates reflexivity in prediction: if everyone uses the same reasoning to predict attendance, they all make the same decision, which produces attendance that falsifies the prediction. Good individual predictions require heterogeneous reasoning, and the system as a whole cannot be solved by any single strategy.

How long does The Bar That Everyone Goes To take to play?

About 8 min, at core difficulty, across 4 decision points. It runs in your browser with no account and no sign-in.

Keep exploring

More Classical Game Theory scenarios, or browse all scenarios. New to this? Start with how DecisionPlay works or the game theory glossary.

Topics: el-farol, reflexivity, congestion, game-theory