Game Theory in Cold War Decision Making
The Cold War was a time of uncertainty for the United States, the Soviet Union, and the rest of the world. Both sides had little information about how the other was playing the “game” of war or how the other side would react to any given move. The concept of Mutually Assured Destruction is well known. This concept gave the United States the best insight into how the Soviet Union might react to an offensive or a show of aggression and vice versa. A great example of this is the Cuban Missile Crisis.
First Action: The Soviets installed missiles on Cuban soil, close enough to attack the United States.
Now, the Soviet Union can plan out what will probably happen next: The United States, knowing attacking the Soviets would escalate things to the point of destruction for both sides, would warn the Soviets and the Soviets would then comply, knowing that if they didn’t their inaction would escalate things to the point of destruction for both sides. Now, you can see a kind of loop in the train of thought for both sides. Let’s see what actually happened:
Second Action: The United States blockades Cuba for a show of force to warn the Soviets.
Third Action: The Soviets withdraw their missiles from Cuba.
The U.S. responded only with a blockade because they knew if they didn’t the Soviet Union would destroy them and the Soviets complied because if they didn’t, they know the United States would destroy them. It’s an interesting game of cat & mouse, or an arm wrestle that never ends. Both teams are playing the game perfectly, and do not deviate from their strategy because there would be no gain from that.
Let’s examine the payoffs for this incident or any other cold war incident going differently than it had:
Although at first glance there seems to be a payoff in moving strategies from “Low Aggression” to “Aggression”, both sides knew that one side using low aggression and the other not was not an option, since both players are playing perfectly. So effectively, an initial payoff of 5 would result in a negative payoff of -100. (These numbers being arbitrary just to show stakes). This Nash Equilibrium forms if both players are considering the future, which they are. If the United States nukes the USSR today, they would get a payoff of +5, but tomorrow the USSR would nuke back to give the U.S.A. -100, and vice versa forever since neither side would trust the other in a ceasefire. This type of situation makes the best strategy brinkmanship – pushing the other player to their limit to see if they waver and taking advantage if they do.
Although the two players were engaged in a Nash Equilibrium which is supposed to go on indefinitely, the Cold War eventually ended when the Soviet Union fell apart, and forfeited the game.
Sources:
http://cbc.net/steve/sub1.html
http://www.econ.umn.edu/~evdok003/ColdWar_GameTheory.pdf