Game Theory


The prisoner’s dilemma is a great example of game theory.  In figure 1 you can see the generalized form of the payout structure for 2 individuals (vertical and horizontal) either cooperating and telling the truth (C) or defecting and not confessing (D).  If you are interested in learning more about the prisoner’s dilemma, the wiki on the subject is a great place to start!  http://en.wikipedia.org/wiki/Prisoner’s_dilemma


FIGURE 1:  Prisoner’s Dilemma

Figure 2 shows a similar payout structure to the standard prisoner’s dilemma as it applies to the decision/law ceasing cigarette advertising on television.  As you can see in the bottom right quadrant, one effect of the ban was to allow both companies to retain more profits without fear of the other company capitalizing by advertising.

This example is based on the youtube video here, where you can see a bit more of a detailed look at the concepts involved.

FIGURE 2:  Advertising


The Survivor example is one of my favorites ever.  I doubt Richard had any idea exactly how accurate his decisions were on a purely statistical level.  This is a great way to show how naturally we all process this data.  A Good Guy To Know should realize how powerful this kind of thinking can be!  This chart was taken from the game theory textbook Games of Strategy (Dixit, Skeath, Reily Jr., 2009).

FIGURE 3:  Survivor

Survivor Game Tree


Lastly, here is a youtube video of some simple game theory and how powerful it can be, even when all players know the rules.  I love this video…




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