Thursday, 23 June 2011

Vicarious Problem-Solving & Schelling Folksy Definition of Game Theory

Hi All,

I was looking through my notebooks and I thought these quite good. I do like the idea of game theory having the advantage of being naked and therefore seeing its limitations is a lot easier.

Mary Ann

From Preface to Thomas C. Schelling’s Choice and Consequence: Perspective of an errant economist.

We figure what a person might do by putting ourselves into his position, as best we understand that position, adopting for the purpose as much as we know about his own preferences and deciding what he ought to do. By “what he ought to do” we merely mean what he should decide in accordance with his own aims, values, and objectives, given the alternatives that he faces.

Then from Chapter 10, ‘What is Game Theory’ in the same book.

There is no independently “best” choice that one can make: it depends on what the others do. pg. 214

Game Theory

(from Schelling Chapter 10)

Game theory usually supposes – a man’s ethics are what have recently been called “situation ethics”; he is concerned with outcomes, not intermediate processes. . . . The decision-maker is assumed not trying to be boldness or novelty, not trying to surprise us for the sake of surprise itself; he is not concerned with why his partner may choose a particular strategy, but what strategy his partner will choose. Nothing but the outcomes enter his value system. If a man has good will or malice toward his partner, a conscience or a bent for mischief, it is all assumed to be reflected in his valuation of the final outcomes. It is assumed that all the elements of his value system are displayed – everything that matters to him is allowed for – in the ranking or valuation of cells in the matrix. pg.240.

Game theory does often have the advantage of being naked so that, unlike those of some less explicit theories, its limitations are likely to be noticeable.

“Game theory” – the name has frivolous connotations. It is also easily confused with gaming, as in war gaming, business gaming, crisis gaming – confused, that is, with simulations of decisions or conflict.

Its name arises from the observation that many parlour games have the key quality of interdependence among players’ decisions, chess game, bridge game – depends on what one’s opponents are likely to do, even on what one’s partners are likely to do.

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