[lbo-talk] more on the econ Nobel

Tommy Kelly tkelly15450 at charter.net
Mon Oct 10 11:16:20 PDT 2005


Doug wrote: [game theory always struck me as mostly empty wankery - can someone convince me to the contrary? not to be too literal-minded, but what town has five identical tire stores, anyway?]

John Allen Paulos wrote about the game theory in Beyond Numeracy: "Game theory is most useful when there is an element of bluff involved & when probabilistic strategies are therefore required. In games with perfect information such as checkers or chess, there is always an optimal deterministic strategy, & moves needn't be random or secret. Although much is known about games of this sort, the existence of a winning strategy for them doesn't necessarily mean it can be found in 'real time.' ...

A game situation arises when 2 or more players are each free to select from a set of possible options or strategies. These choices in turn result in various outcomes -- payoffs or penalties of different magnitudes. Each player has preferences among these outcomes. Game theory is concerned with the determining of player's strategies, costs & benefits, & equilibrium outcomes.


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It doesn't take much imagination to see that there are many situations in business (labor conflicts & market battles), sports (virtually all competitive contests), & the military (war games) that can be modeled in a game-theoretic way.


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A useful tool, the technical apparatus of game theory shouldn't be allowed to obscure the assumptions which go into any particular negotiation or contest." Pages 91-94



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