## Ranji Trophy and the Ultimatum Game

The Ultimatum Game is a commonly used research tool in behavioural economics. It is a “game” played between two players (say A and B) where A is given a sum of money which he has to split among himself and B. If B “accepts” the split,  both of them get the money as per A’s proposal. If, however, B rejects it,  both A and B get nothing.

This setup has been useful for behavioural economists to prove that people are not always necessarily rational. If everyone were to be rational, B would accept the split as long as he was given any amount greater than zero. However, real-life experiments have shown that B players frequently reject the deal when they think the split is “unfair”.

A version of this is being played out in this year’s Ranji Trophy thanks to some strange rules regarding points split in drawn games. A win fetches five points while a loss fetches none. In case of a drawn game, if the first innings of both sides has been completed, the team that has scored higher in the first innings gets three points, while the other team gets one. The rules, however, get interesting if not even one innings for each side has been completed. If the match has been rain affected and overs have been lost, both sides get two points each. Otherwise, both sides get zero points each!

I don’t know about the rationale of this strange points system, but I guess it is there to act as a deterrent against teams preparing featherbeds, batting for most of the four days and not even trying to win the match. In general, I haven’t been a fan at all of the Ranji Trophy’s points scoring system, and think it’s quite irrational and so refuse to comment on this rule. What I will comment about, however, is about the “ultimatum” opportunity this throws up.

In the first round of matches, Saurashtra batted first against Orissa and piled up a mammoth 545 in a little under two days. The magnitude of the score and the time left in the match meant that Orissa had been shut out of the game, and the best they could’ve done was to overtake Saurashtra on first innings score and get themselves three points. However, they batted slowly and steadily, with Natraj Behera scoring a patient double century, and with a few minutes to go in the game, they were still over 50 runs adrift of Saurashtra’s score, with three wickets in hand.

At that time, they had the chance to declare their innings, still some runs adrift of Saurashtra’s score, and collect one point, and handing over three points to Saurashtra. They, however, chose to bat on and block the game, and both teams finally ended up with zero points. It maybe because they also see Saurashtra as a competitor for “relegation”, but I thought this was irrational. Why would they deny themselves one point – if only to deny Saurashtra three points? It’s all puzzling.

Going forward, though, I hope the Ranji Trophy rules are changed to make each game a zero sum game (literally). Or else they could adopt the soccer scoring of 3 points for a win and 1 for a draw (something I’ve long advocated), first innings lead be damned!

## The Impact of Wall Street on Grad School

I don’t need to be an insider to tell you that Wall Street employs lots of PhDs. PhDs of various denominations, but mostly those with backgrounds in Math, Physics and Engineering are employed by various Wall Street firms by the thousand. I don’t think too many of them exactly work on the kind of stuff that they were doing in grad school, but certain general skills that they pick up and hone through their multiple years in grad school are found extremely useful by banks.

So while scores of older scientists and economists and policymakers lament the “loss” of so many bright minds to science, has anyone at all considered the reverse possibility? Of the impact that Wall Street has had on grad schools in the US?

One thing you need to face is that there are not a lot of academic jobs going around. The number of people finishing with PhDs each year is far more than the number of academic jobs that open up each year. I’m mostly talking about “assistant professor” kind of jobs here, and assuming that becoming a post-doc just delays your entry into the job market rather than removing you from the market altogether.

In certain fields such as engineering, there are plenty of jobs in the industry for PhDs who don’t get academic jobs, for whatever reason. Given this, it is “cheaper” to do a PhD in these subjects, since it is very likely that you will end up with a “good job”. Hence, there is more incentive to do a PhD in subjects like this, and universities usually never have a problem in finding suitable candidates for their PhD programs. However, there is no such cushion in the pure sciences (math/physics). There are few “industry employers” who take on the slack after all the academic positions have been filled up. And that is where Wall Street steps in.

The presence of Wall street jobs offers a good backstop to potential Math and Physics PhD candidates. If they aren’t able to do the research that they so cherish, they needn’t despair since there exists a career path which will enable them to make lots of money. And knowing the existence of this career option means more people will be willing to take the risk of doing a PhD in these subjects (since the worst case isn’t so bad now). Which in turn enhances the candidate pool available to grad schools.

So even if you were to believe that complex derivatives are financial “weapons of mass destruction”, there is reason for them to exist, to encourage the financial sector to pick up PhDs. For if PhDs were kept out of these jobs, it is real academic research in “real subjects” such as the pure sciences that will suffer. By picking up PhDs in large numbers, the financial sector is making its own little contribution to research in pure sciences.