You may have noticed the discussion in Taylor (2014) at the end of Chapter 10 about oligopoly and the prisoner’s dilemma. The prisoner’s dilemma is an example of game theory. A “game” is like a board game, as your optimal move depends on what your opponent does. The same holds in oligopoly, as your own decisions as to what price to charge or how much to produce depend on what your competitors do.
Take a look at the following video that tries to illustrate oligopoly and game theory through a Batman movie: https://www.youtube.com/watch?v=JMq059SAQXM
Find one other YouTube video on game theory and share the link with your classmates. Then discuss the following issues:
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- Did the Batman video or the other video you found help explain the concept of game theory? Or was it just silly?
- Besides oligopoly, can you think of any other situations that game theory is useful for? This can be situations in the business world, in your own workplace, or even something you saw in a movie or TV show.
- What do you find easier to follow – the game theory matrices or the math equations/computations that you’ve used in this class?
Finally, watch some of the game theory videos that your classmates found and give your comments on these videos.
What game theory teaches us about war | Simon Sinek https://www.youtube.com/watch?v=0bFs6ZiynSU
Simon Sinek, a favorite author and speaker of mine, introduces two types of games in Game Theory: Finite and Infinite games. A Finite game has known players w/fixed rules and mutually understood and agreed upon objectives. An Infinite game has both known and unknown players, the rules can be changed and the objective is to perpetuate a game. These ideas have shaped our foreign policy, for better or worse.
Finite players versus finite players are in a stable game, the system is stable (baseball, conventional war). Each of these games have clear winners and losers as well as decisive end points. Infinite versus infinite players also play a stable game: there are no winners or losers. Players can only drop out when they’ve run out of resources or lost the will to play. Otherwise, the game continues in perpetuity. A situation in which a finite player plays an infinite player creates problems, chaos. The finite player gets caught in a difficult situation.
One example of finite players playing infinite games is in business. The concept of business has existed longer than any business and will exist long after current/existing businesses have dissolved. Businesses today are playing finite games on an infinite playfield: their strategies are often quarter to quarter or year to year.
Another example of finite versus infinite players was the United States in Vietnam, or later, the Soviet Union in Afghanistan. The people of Vietnam and Afghanistan were fighting for their livelihoods, their existence. They were playing infinite games. In each case, the major powers (U.S. and Soviet Union, respectively) were fighting to win. They were playing finite games. In each case, the finite player dropped out because they had lost the will to fight, either by public opinion, economics, or military futility.
The United States foreign policy during the Soviet Occupation of Russia was to eject the Soviets: a finite goal. If the U.S. was unable to eject the Soviets from Afghanistan, the policy would be to make it as expensive as possible for the continued Soviet occupation of Afghanistan: an accidental infinite strategy.
The Soviets eventually did run out of resources and will to occupy Afghanistan.
Game theory is interesting, but harder for me to peg than the formulas we’ve been using to find average cost, marginal costs, etc. Perhaps this is because the formulas a finite. I know what to look for, where the problems begin and end. It’s not clear to me that there is an end to game theory exploration.
Sinek, S. (2016, November 8). What Game Theory Teaches Us About War. YouTube.com. Retrieved October 22, 2018, from