The Joy of Game Theory

When we speak of “Game Theory” — with “Game Theory” amounting to the study of decision-making and strategy in order to render favourable outcomes — we must first define the term “game” as a starter. Arguably, a “game” consists of three components:

1. The different players which are involved in a game

2. The various moves that each player can make in order to achieve their goals and objectives, which is known as “strategy”

3. The possible outcomes which can arise from a strategy, as well as the “payoffs” or “utility” which arise as a result of a certain course of action

In turn, there are different types of games, ranging from petty ones to much riskier ones such as the infamous “Great Game,” which involves the imposition or promotion of one’s beliefs and values through military, economic, and propagandistic means.

But in every game, the situation calls for two things, namely, the recognition of “strategic situations” on one hand and the ability to transform “no-win situations” into “mutually beneficial outcomes” on the other hand, according to the game theorist Presh Talwalkar. What is key in a “strategic situation” is a mechanism known as “Iterated Elimination of Dominated Strategies” (IEDS), which basically amounts to the elimination of what can be deemed as “bad moves” once a person has entered into a strategic situation. Opposite of a “dominated strategy” is a “dominant strategy,” which equates to the best possible strategy one can follow, regardless of what the other players are doing. As mentioned before, the manner in which a person plays a game depends on what the other players are doing. Thus, one’s strategy can be considered the “best response” to the strategy of all the other players, which theoretically leads to what is known as the “Nash Equilibrium.”

The most strategic situation of all for any player in a game theory sense is when a player wields an alternative to an initial preference or goal. Once an alternative is wielded, game theory is essentially moot, according to Talwalkar. And what follows from wielding an alternative to an initial goal or preference is a bargaining situation. Key to a bargaining position are the ability to stand firm on one’s position, playing by one’s own rules, limiting one’s options in order to strengthen one’s bargaining position, withholding what one has to offer until a concession is made by the other side, as well as playing for the long run rather than the short run.

In many cases, a bargaining situation can coincide with conflict. In fact, conflict can be seen as a form of bargaining. But as the late game theorist Thomas Schelling argued, conflict is always juxtaposed with the need for cooperation, which in turn fosters what is thought to be a universal situation, namely, a “Prisoner’s Dilemma.”

One timely example of a “Prisoner’s Dilemma” is the relationship between the United States and China. The latter is a revolutionary power which is seeking to either change or undo the status quo, whereas the former is a status quo power which seeks continuity and “stability.” Yet, despite the potential for conflict between the status quo and revolutionary forces, both are also in need of cooperating with one another.

In many cases, the revolutionary power is far more creative and innovative than the status quo power, given that the latter has gone through corruption and decay, thus resulting in the rise of a revolutionary power. And more often than not, the foremost strategy of a status quo power is one that is based on “deterrence.” But “deterrence” is a vague concept which has no clear definition or end game, as was noted by Schelling in his Nobel Prize winning book titled “The Strategy of Conflict.”

Thus, in the end, one side of a bargaining situation or conflict will have to concede to the other in one way, shape, or form in order to avoid conflict and mutual destruction. The question then becomes one of who will concede first. Most likely, it is the status quo power which has to concede first, given that the momentum is on the side of the revolutionary power, although nothing is set in stone.

One other thing to note is the role of intuition in guiding the tactics which fall below the strategic level of goals and objectives. Because of intuition, nothing we do can be deemed fully “rational” in the modern sense of the term. But given the fact that cognition of the need for cooperation cannot be lost in the midst of a bargaining situation or conflict, it follows that communication can signal a commitment to cooperation, depending on the manner by which the communication is carried out and facilitated. Thus, the importance of communication and dialogue, the importance of which cannot be understated or overstated.

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