Cold War Game Theory and the Government Shutdown
The Cold War was a classic example of the Prisoner’s Dilemma where the United States and the USSR were both under pressure to launch their nuclear arsenals while not knowing what the other side was planning. While the optimum solution would be for both sides to dismantle their warheads, the risk that one side would dishonor their agreement was too great for either side to take. When it came time for negotiations, the United States needed to look powerful while the USSR had to please the extremists who had power. Thus the concessions made by each side were tailored to pleasing their supporters whether it be the general public or hotheaded politicians. The United States would agree to dismantle useless defensive equipment and the Soviets would dismantle their rockets. The public in the United States were satisfied with the weakened Soviet position without learning that they had made concessions to the enemy. The Soviets on the otherhand mantained a doomsday device that could retaliate against an American attack even if their leaders were wiped out to keep their hotheaded leaders at the negotiation table and to prevent them from pulling the trigger on their weapons too early. While the Americans were busy maintaining their image for the public, the Soviets were reassuring their leadership that if the Americans were to dishonor their agreement, both sides would suffer deeply.
The author, Nicholas Thompson, goes on to relate this strategy of mutually assured destruction to the government shutdown last year. While Obama needed to keep his promise to the public that he would not budge on Obamacare, the Republicans want assurance that they can bring Obama down with them before they budge on the deficit ceiling. Thompson argues that if Obama would give the Republicans their doomsday device to bring down Obamacare if it seems to be detrimental to the economy then the Republicans would be willing to move on the deficit ceiling.
This article brings up an interesting aspect in game theory where the players must set up the matrix so that the they are ‘forced’ to choose the mutually beneficial option under the assurance that both players will lose if one tries to play for his own gain. In the prisoner’s dilemma this would be represented by a lawyer convincing player 1 to stay silent by telling him that even if player 2 confesses, he will be punished severely for ratting his partner out. Armed with the knowledge that if he goes down, player 2 will also be punished, player 1 will most likely chose to stay silent even though player 2 is not aware of the threat. While player 2 might still see the matrix as a regular prisoner’s dilemma, in player 1’s matrix player 2 has nothing to gain by confessing and the Nash Equilibrium for player 1 is to stay silent.
‘Fixing’ the matrix is a very intriguing idea when it comes to business decision and convincing groups of people that taking the mutually beneficial route is the best option. Even if the competing business or group does not know about a ‘doomsday device’ that you have, it will make convincing your partners that the best option is the one where both sides trust each other. This shows that the Nash Equilibrium only depends on the player’s knowledge about the game and not if the opponent knows the full game.
ref: http://www.newyorker.com/news/news-desk/how-cold-war-game-theory-can-resolve-the-shutdown