Using Game Theory to Understand and Make Choices
Jain, N. (2022, July 23). 5 game theory concepts to effectively navigate in life. Medium. https://medium.datadriveninvestor.com/5-game-theory-concepts-to-effectively-navigate-in-life-d6fbc4106675
One’s mindset on how they approach a given problem can greatly alter the ultimate result of the issue. In his article titled, “5 Game Theory Concepts to Effectively Navigate in Life,” Nishu Jain, a Software Engineer who specializes in python algorithms, discusses how concepts from game theory, the focus of many of our class lectures and readings, can be applied to various scenarios people encounter in their lives. Jain discusses five concepts, “The Prisoner’s dilemma,” “The Tragedy of the Commons,” “Uncertainty and Information asymmetry,” “Repeated games,” and “Nash Equilibrium.” Since game theory analyzes the strategies for any given situation along with the outcomes based on a given choice of action, applying these concepts to one’s life and their decision making processes can produce optimal results. Jain explains basic concepts that we learned in class like games, strategies, payoffs, and Nash Equilibria and explains in simple terms how these are applied to the five basic scenarios mentioned above. This article allows people to view their daily interactions in more strategic ways by relating them to scenarios used in game theory and making choices that are similar to those which produced the best result.
On top of applying best strategies to my daily life, this article inspired me to apply game theory concepts in order to understand the actions of other people and society. For example, The Tragedy of the Commons, explained in scenario number two by Jain, could be applied to many real world problems and explains why people make choices that will ultimately lead to their downfall. The Tragedy of the Commons model has two choices, maximize one’s own gain, depleting the source or cooperate with others to protect the source. In the Nash equilibrium of this scenario, all players suffer as the best strategy for each individual person is to maximize their own gain, regardless of what the others are doing, and as a result, the resource is depleted. Given that people are looking out for themselves, if others choose to preserve the resource, it’s in one’s best interest to use the resource; if others are depleting the resource, it’s still in one’s interest to use the resource. In the original example of The Tragedy of the Commons, illustrated in a 1968 article by Garrett Hardin, Hardin described how the world’s fisheries were depleted. However, The Tragedy of the Commons is a recurring scenario that can be applied to modern day issues like oil companies and global warming. It’s in each individual’s best interest to purchase cars and gas that give the best mileage per cost, which explains why people haven’t largely shifted to greener alternatives. The five scenarios described by Jain are useful in explaining human behavior and why positive change is so difficult to achieve on large scales.