Portrayal of Human Nature in Game Theory
The recent lectures have been about game theory and its related concepts. Game theory explains that when one is making a decision, unconsciously or consciously, one considers multitude of factors, which includes not only what the person wants, but also how choices one makes would impact those that one is interacting with. A famous example related to game theory is the Prisoner’s Dilemma. Prisoner’s Dilemma deals with a team of two burglars that is accused of robbery and are being interrogated by the police separately. The duo cannot communicate during interrogation, and the outcome of each burglar’s sentence depends on both of their answers collectively. The payoffs, which would be consequences for each of the possible decision made for each case, can be shown in a payoff matrix:
(https://www.britannica.com/science/game-theory/The-prisoners-dilemma)
In Prisoner’s Dilemma, an important point to note is that whichever decision the other burglar makes, one should always choose to confess, because that always leads to less years in prison, no matter what the other burglar decides to do. This makes the strategy of confessing the dominant strategy. In the case that there is no dominant strategy, the concept of Nash equilibrium is used. Nash equilibrium states that even in the case where there is no dominant strategy, players should make a decision that would be the best response to each decision other players can make.
Although there are many examples that were given throughout lectures pertaining to game theory, I personally felt as though formatting the real-life example into a structured game felt slightly forced. In the article How Game Theory Affects Your Everyday Life, Charles Cazals clarifies how the ideas touched upon in game theory can be applicable in our daily lives. The first example Cazals gives is that if one were to buy milk, he or she would compare milk prices of the nearby stores and go to the cheapest store. Cazals then proceeds to talk about how Nash equilibrium shows such decision-making could “lead to collectively undesirable (or even disastrous) outcomes” (https://thelondonglobalist.org/how-game-theory-affects-your-everyday-life/). Some examples that were given were how professional athletes would be better off collectively if no one were to use drugs that enhance their performances, but because of the benefit that comes with being the only one using the drug, all the athletes could individually assume that no one else is using the drug and end up with everyone using the drug. Another example given was about environmental policies regarding carbon dioxide emissions. All the countries would have to uniformly act to reduce carbon dioxide emission. Nevertheless, as Cazals explains, because of economic benefits that come with emitting carbon dioxide for industrial production, no country ends up prioritising reducing carbon dioxide emission over economic benefits that comes with industrial production.
The examples given by Cazals in his article not only clarifies the applicability of game theory in real life, but it also shows that game theory and Nash equilibrium are basically portraying human nature of selfishness. As concepts in game theory suggests, people tend to care the most about what would be the best outcome for themselves – most humans are not able to resist the temptation of serving their interests in the moment, even if it will eventually negatively impact lives of all.
Article link: https://thelondonglobalist.org/how-game-theory-affects-your-everyday-life/