Note: This post represents the synthesis of the thoughts, procedures and experiences of others as represented in the 8 articles read in advance (see previous posts) and the discussion among the students and instructor during the Advanced Analytic Techniques class at Mercyhurst University in March 2013 regarding Game Theory specifically. This technique was evaluated based on its overall validity, simplicity, flexibility and its ability to effectively use unstructured data.
Mesquita (2011) defines game theory as a "a body of reasoning, grounded in mathematics but readily understood intuitively as a reflection of how people may behave, particularly in situations that involve high stakes for them. It is part of a family of theories that assume people are rational, meaning that they do what they believe (perhaps mistakenly) is in their best interest." Game theory is a methodology that allows a player to make a decision based on predictions of what the other player will do and weigh their potential options in relation to the options of the other players. Each payoff will be different depending on the combination of strategies.
1. Looks at multiple scenarios between the actions of two parties
2. Applicable to many fields
3. Denial and deception actions by the adversary can be taken into account within game theory models
4. Not entirely accurate or helpful if only performed once
5. Is effective in emphasizing the importance of critical thinking in making a decision and understanding the potential consequences of particular decisions
1. Have to be able to play a role
2. Level of accuracy can be low
3. Difficult to simulate unless it is a real-life situation
4. Assumes that the players are rational actors
5. Some scenarios need to be played multiple times to witness a discernible pattern of behavior between the parties.
6. Rational behavior within the game model is different than rational behavior with human interactions. Human interactions should be taken into account with the game model.
7. An iterated game will change the result of the outcome
Step by Step Action:
1. Construct a matrix
2. Determine possible decisions the players are likely to make
3. Determine how the players maximize the benefits based on those decisions
4. Conduct the exercise to see how the possible outcomes play out
5. Repeat exercise to get better results
Begin with 20 gold coins considered your “loot”. Each person playing the game is assigned a number. The person with the highest number holds the most power. The person holding the most power begins the game by making a proposal as to how to assign the coins, keeping in mind the person with the most power wants maximize the amount of coins they have while appeasing a majority of the players. A vote is taken, a majority is necessary for the person with the highest number to keep power. If a majority is not achieved power moves down to the next person and the process starts again.
Some interesting dynamics resulted when we calculated the exercise as a class. Rationality for the first round demonstrated that the rationality to distribute the coins evenly among the participants was not the chosen course of action by the first offering which was voided. Playing the game multiple times demonstrated the need for the first two individuals to give offerings that were fair to everyone, and most significantly allow the players with the most power to gain coins ( positive sum games) instead of zero sum games in which the other players benefitted from the higher ranked individuals incorrect rationality.
Mesquita, B (2011) Applications of Game Theory in Support of Intelligence Analysis. Intelligence Analysis: Behavioral and Social Scientific Foundations, 57-82. Retrieved from http://www.nap.edu/openbook.php?record_id=13062&page=57