Let’s Talk About Game Theory

Hello beautiful reader,

Today, I want to discuss one of my favorite topics: Game Theory.

According to dictionary.com, the definition of game theory is:

noun
a mathematical theory that deals with strategies for maximizing gains and minimizing losses within prescribed constraints, as the rules of a card game: widely applied in the solution of various decision-making problems, as those of military strategy and business policy.

I first saw game theory in action in one of my favorite tv shows, Prison Break. If you’ve never watched Prison Break, I highly recommend it. Spoiler alert: Michael Scofield, the main character, never ceased to amaze me with his ability to not only see multiple steps ahead, but his ability to account for different pathways to his desired result. Every time things didn’t go according to plan, he’d find the next best way to still get what he wanted. It was fascinating to watch. But, at the time, because I didn’t understand how he did what he did, I just assumed his ability to plan so well was just an unattainable, mysterious gift.

However, during my senior year of high school, I took an economics class where I learned about a principle called game theory. I instantly fell in love with this concept.

Our teacher helped us practice game theory by teaching us how to play chess and making us act out the Prisoners’ Dilemma.

For those who don’t know what the Prisoner’s Dilemma is, here’s a pretty cool graphic illustrating the rules of the exercise:

So, in this economics class, our teacher paired us up three separate times with three different partners for three rounds of the exercise. Needless to say, I betrayed my partner every time.

A few years later, in one of my college classes, I learned about the Ultimatum Game. This one is even more fun. All you need is two players and one (optionally hypothetical) fifty-dollar bill. The rules are as follows:

• Player 1 proposes how the two will split the money.
• Then, Player 2 can either accept or reject said proposal.
  • If Player 2 accepts the proposal, that is how the money will be split.
  • However, if Player 2 rejects the proposal, the fifty-dollar bill is taken off the table and neither player gets any money.

Naturally, it would make sense for Player 1 to propose a 50/50 split, but some people take advantage of the rules and might propose something more drastic like a 90/10 split. It is, then, up to Player 2 to decide what is more important to them: their pride or taking home five dollars they didn’t have before.

Alternatively, in an attempt to ensure they walk away with money, Player A might go the opposite, equally drastic route and propose something like a 10/90 split. In which case, Player 2 would have every reason to accept the offer.

In Round 2, the game resets and players switch roles.

How does it work?

Although the more flashy and seemingly impressive examples of game theory do require quite a bit of planning and research, we all already utilize game theory in our daily lives whether we know it or not.

Some examples of utilizing game theory in our daily lives include:

• Playing tic-tac-toe
• Waiting for the right moment or waiting until your boss or parents are in a good mood to ask for something you really want, knowing that they are more likely to be receptive when they are in a good mood.
• Purposely omitting certain information while making an argument, knowing that the other person might use said omitted information to invalidate or weaken your argument.
• When asking for something you want, leading with why it would be beneficial for the person you are asking rather than leading with why it would be beneficial to yourself.

We all do this without realizing just how strategic it is. Some of us might have even been particularly mischievous children who have been utilizing game theory for a while without realizing it.

Knowing what you want out of a situation and approaching it with your end goal in mind helps you create a malleable road map to get there. On the way to your goal, you become sensitive to and responsive to the other party’s concerns, wants and whims. As a result, practicing game theory helps you practice empathy.

What I love so much about game theory is how it can be used for good. Not just personal good, but the greater good.

If you would like to learn more about Game Theory, there are plenty of other sources out there including, but not limited to, YouTube videos such as Game Theory: The Science of Decision-Making, Game theory: Two key principles for winning negotiations | Kevin Zollman, Evolutionary game theory | Individuals and Society | MCAT | Khan Academy

I also HIGHLY recommend a more recent example of a show with a protagonist who masterfully utilizes game theory: Lupin.

What are your thoughts on this? Have you ever purposely utilized game theory? Let me know in the comments!

I hope you have a lovely day!

Until next time,

M

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