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Game Theory, The Drug World, and the Mexican Drug War

In many of the interactions that people have on a daily basis with one another, game theory can be applied. Since there are so many different types of game theory, it can be applied in virtually every situation where there are two or more parties, and where certain decisions are dominant over others. The interesting thing about game theory is that it also takes into consequences of the decision of the other party. In a lot of cases, a Nash Equilibrium often arises as a result to this. From minor bargaining schemes to major businesses wanting to make as much money as possible, game theory, although not always explicit, is used.

One example of this is in the drug world. An obvious scenario that was looked at in class is the Prisoner’s Dilemma. Applying it to the drug world, it assumes that two subjects have been caught, and the police are interrogating them. Their choices are to confess or not confess, and their prisoner sentences depend on what they do, as well as what their partners do. It is given that if they both confess, they receive a good amount of time in prison. If one confesses and the other doesn’t, the one who confessed gets let off while the other gets a very harsh prison sentence. If both don’t confess, they both get very light prison sentences. The dominant strategy here is to confess, but the best overall decision would be to both not confess in order to receive the least amount of aggregate time in jail.

A more complex situation arises in Mexican Drug War. This was started in 2006 by President Felipe Calderon, and the two biggest drug cartels in Mexico are the Gulf Cartel and the Sinaloa Cartel (Aquino 2011). In this particular case, a study done by Edgar Aquino via trial and error resulting from Mexican governmental tactics, there are four options for the government. The first is to focus all its power on one cartel. The second is to fight against both. The third is to legalize drugs completely, and the fourth is to ignore the problem. Clearly, the last option isn’t the best strategy for the government. This is because the cartels would continue, and murder/corruption would prevail leading to billions of dollars in loss for the government and thousands of murders (Aquino 2011). Legalizing drugs, the third option, leads to once again the cartels fighting each other, or controlling the market completely. Either way, the risk of losing money, violence, and of course the increase use of drugs are prevalent (Aquino 2011).

This leaves the government with the first two options, since neither of the last two are dominant strategies. The first is not a dominant strategy for the government either, as fighting only one of the cartels leaves the government “vulnerable” and allows the other to attack the government or more easily help the other cartel (Aquino 2011)

Because of all this, the first option is the dominant strategy for the government in this situation. The payoff is highest for the government, as eliminating both of these cartels at once would lead to most profit to the government. The drug cartels can either work together at this point, or fight one another and the government at the same time. Clearly the better choice is to work together.

However, by picking choice one, the government forces the drug cartels into a prisoner’s dilemma. This is because if one decides to betray the other during this war (homologous to confessing) while the other doesn’t, the betraying party can maximize its profits of the drug war eventually (Aquino 2011).
Now the choices are to both cooperate (which is like both not confessing) leading to the most aggregate pay off, or one can turn its back on the other leading to a major pay off for that one party. This dilemma is likely to often lead to problems for the cartel, which should give the government the advantage! Therefore, through a simple appliance of prisoner’s dilemma, we’re able to figure out the governments best response to the drug trade.

Link to academic paper: http://cms.uhd.edu/faculty/redlt/edgarseniorproject.pdf

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