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Games, gas and government

Games, gas and government
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First Published: Wed, Sep 02 2009. 09 17 PM IST

 Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Wed, Sep 02 2009. 09 17 PM IST
It is tempting to speculate on why the Union government “revised” its stand in the Supreme Court in the Ambani brothers’ dispute on natural gas from the Krishna-Godavari basin.
Illustration: Jayachandran / Mint
There are some who will say that Anil Ambani’s media blitz on how the government’s stand was causing a loss to the exchequer may have forced our politicians to rethink the matter. Others may argue the government knows its responsibility. Maybe, but as always, truth is more complicated.
Think about the situation this way. Two thieves are caught after a robbery. They are asked by the jailor to confess. If both of them confess, they get ten years in jail. If neither confesses, the jailor has no evidence and both prisoners get one year in jail. In case one prisoner confesses and the other does not, the one who confesses gets no punishment and the one who does not, spends 25 years in prison. Because they are interrogated separately and both know the pay-offs from confessing or not confessing, they end up confessing, as that is the safest course for them. While the story is about jailbirds, the Prisoner’s Dilemma is a parable for many situations in life where conflict is the norm and cooperation an exception.
Because their interests are so misaligned, one may say that the Ambanis are locked in a Prisoner’s Dilemma situation. They may well be, but with a difference: It is not a one-shot game, but one that is played repeatedly. It is well known that in repeated plays of Prisoner’s Dilemma, expectations of future returns can lead to cooperative outcomes. This happens when players change their discount factors. In this case the “jailor” (the Union government) is trying to ensure a cooperative outcome. Future rounds of the New Exploration and Licensing Policy (Nelp) are in the offing and there are other consumers who want natural gas. So if the one-shot game goes badly, who knows what will happen in the future. By attempting to change the discount rates of the key players (the revised position before the Supreme Court can be interpreted in this way), the government is trying to get to a cooperative outcome.
The story can be complicated a bit to make it more interesting. What if the “jailor” is not neutral? What if he has become neutral after realizing the folly of siding with one player? What forced a rethink? There are no simple answers. The Ambanis are not small players: They have influence that can and does rock the government. It is not a simple game of allocating favours as in the bad days of socialist visions. The possibility of both players influencing government ministers is very real. Because of the political clout of the players in question, the “jailor” himself may be in danger if he does not behave appropriately. Perhaps that fear forced a rethink.
Is the government neutral in the Ambani case? Tell us at views@livemint.com
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First Published: Wed, Sep 02 2009. 09 17 PM IST