Wednesday, July 8, 2009

Game Theory

No, this post isn't going to be about what to do when it's 4th and long and you're down by 6. I want to talk about game theory the way mathematicians and economists do. Don't walk away; I promise not to bore you!

If you ever saw the movie "A Beautiful Mind" then you learned about game theory already. Russell Crowe has his mathematical revelation when thinking in terms of guys picking up girls in a bar. (Note: I doubt Russell Crowe has ever pondered such a dilemma in real life.). Another example of game theory is frequently seen on "Law and Order" and is known as the Prisoner's Dilemma. In this case two suspects are placed in separate rooms. The police don't have enough evidence and want to get one prisoner to testify against the other. They tell each suspect that if he betrays the other he goes free and the other gets ten years. If they both confess they each get five years. But if neither confesses then they can only be booked on minor charges and each will get six months (for more detail go here).

In both of those examples, working together is the best solution. But what happens when you use game theory for your own benefit to the detriment of others? The answer is, you get Swoopo.com. I learned about this new website in this article and it's fascinating. If I had heard of the site without reading the article first I can see how it would be easy to waste a lot of money for little or no payoff. I think things like this at the intersection of mathematical theory and psychology are fascinating. That said, if you ever get stuck in a prisoner's dilemma situation with me, I'll probably crack. No way I can stand up to this guy!

1 comment:

Heather said...

i learned about game theory in my econ class first summer session! it was definitely the most interesting thing in the class :P