Game Theory

10/9/19

Game Theory is a theory that comes from mathematical modelling but it has been applied to many social fields as well as mathematics. The idea is that it’s possible to predict strategic moves from rational participants. The key word here is “rational” - not all humans will comport with these prediction due to humans not always being rational. It was originally devised to explain zero-sum games where the risks were the same for both parties involved and was first laid out by John Von Neumann in 1928. He then followed up his research by co-authoring a book on the subject in 1944. The definition has been widen out in recent years and applied to more than just zero-sum games.

Probably the most famous real life example of Game Theory in action is the Mutually Assured Destruction (M.A.D.) position that the US and USSR took during the Cold War. The idea was that neither the US or the USSR could ever launch a large scale nuclear attack against the other because retaliation would be equivalent on their soil. The idea works because they have an equal force and so the risks are the same for both parties and ultimately both were rational actors. Game Theory is frequently applied to economics and political science. It’s application in economics predates Von Neumann’s description, dating back to the 1830’s. Here’s where that important word “rational” comes into play. Humans sometimes don't act in a rational way.

The Prisoner’s Dilemma is often described using Game Theory. It posits that 2 prisoners arrested committing a crime together are given an offer from the police: if Prisoner A and B both betray each other they will each serve 2 years. If one betrays the other than the betrayer will walk free and the betrayed will serve 3 years. If they both remain silent then they will both serve only 1 year. Applying Game Theory to this dilemma it is in the Prisoners interest to betray each other as this gives the greatest reward. The concept was also turned into a short-lived game show fronted by Robert Kilroy-Silk called Shafted, where people were given the Prisoners Dilemma for their winnings at the end, they could either 'Share or Shaft' another player. You can learn more real world applications of Game Theory at our talk tonight with Tom Chivers - 7:30, Banshee Labyrinth.

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