How Game Theory Explains ‘Irrational’ Behavior
As humans, we act. Whether positive or negative, these actions have consequences. However, some people still opt to take part in these actions resulting in these negative outcomes. If one can foresee these implications, why would they continue to make these choices? An article written by Erez Yoeli and Moshe Hoffman highlights the main idea of their book: Game theory is critical in understanding ‘irrational’ human actions. Behavior tends to be more ‘rational’ the more people lean on their learned behaviors as justification for their actions, rather than consciously thinking about the said situation. For example, some people believe that their passion for crafts grew because they can quickly see the fruits of their labors. Others argue that they prefer tannic wines due to their uniqueness. However, these answers can be surface-level responses. How does one explain how people’s beliefs develop? Game theory.
Game theory accounts for one’s actions as well as the actions of others to understand how people, organizations, and institutions will behave in various situations. For example, the Cournot competition, a game theory model that takes into account reactions of all firms after a merger has occurred, is used in determining where a proposer merger or acquisition should occur in the US government. However, these formal situations are not the only time game theory is used. People’s everyday behavior is often based on their learned beliefs. Yoeli and Hoffman argue that people are bad at optimizing when they rely on their conscious minds to do so. However, when people unconsciously rely on learned beliefs, they behave more optimally. These learned beliefs can be attributed to evolutionary responses. For example, people have a tendency to be attracted to people with certain physical features, such as broad hips. This attraction is a result of the fact that these features are associated with good health and thus, fertility.
Inspired by this article and its respective book, I have constructed a simplified potential game theory model for this claim in which an unhealthy player and healthy player decide to interact with the underlying tone of mating. L represents if the decision to interact or not will be negative for said person, whereas W represents if it will be positive. For example, if they both decide to interact, the healthy member would have a negative interaction as they are finding a partner who may struggle with fertility issues. However, the unhealthy member would have a positive interaction as their partner will likely not have fertility issues.
This book serves to remind us that many of our behaviors that seemingly come naturally to us can be explained by game theory to an extent. ‘Natural behavior’ and tendencies are, in reality, learned beliefs. Using these learned beliefs, we make decisions that may seem “irrational” but are, in fact, backed up by logic and evolutionary responses. As I continue in my life, I am inspired to see how game theory can be tied to rash actions.
References:
Yoeli, Erez, and Moshe Hoffman. “How Game Theory Explains ‘Irrational’ Behavior.” MIT Sloan, 5 Apr. 2022, https://mitsloan.mit.edu/ideas-made-to-matter/how-game-theory-explains-irrational-behavior.