02 March 2015
Author: Drew Calvert
Featured Faculty: Ehud Kalai, Professor of Managerial Economics & Decision Sciences at Northwestern University's Kellogg School of Management & Kent Grayson, Associate Professor of Marketing at Northwestern University's Kellogg School of Management
The bluff is a common strategic move that is often thought of as a clever psychological ploy when the odds are stacked against us. However, game theorists often view bluffing as primarily computationally, not psychologically. Professor Ehud Kalai argues that to win in any strategic game one should be unpredictable. If someone bluffs all the time bluffing is no longer an effective method because the opponent knows that they are likely bluffing. The same can be said when someone never bluffs. This article is set up into three sections, Mixing It Up, Knowing the Game, Knowing Yourself and High-Stakes Math.
Kalai defines strategic moves as maximizing one’s ability to be unpredictable. In court, Kalai had to show his ability to play poker and blackjack machines in both strategic and nonstrategic ways. The machines were banned from a local bar in Chicago until the he was able to prove that the machines could be played as a game of skill and not just a game of luck. Zero-sum games uses mixed strategy due to the balancing act of bluffing. This based on the assumption that the opponent is playing just as strategically.
In non-antagonistic games it does not always pay to be unpredictable due to the requirement of full or partial cooperation. Kent Grayson, studied trust and deception. Trust is comprised of three components: competence, honesty, and benevolence. He argues “bluffing is only effective when it is done with a measure of self-awareness.” How the company is perceived determines whether or not they can get away with bluffing without backlash. In games bluffing can be harmless. In businesses bluffing comes at a higher risk.
Game theorists have proven mixed strategy to produce the best result. However, when the stakes are higher, some are not willing to take the risk on a bluff. In the last section, Kalai argues how randomization is tough when it comes to warfare and politics. The example he gives is during the Six-Day War between Israel and its Arab neighbors. Egyptian convoys used Israeli symbols on the roofs of their trucks to fool the Israeli bombers. The bombers were not willing to flip a coin on if the were taking out the right truck or not. The higher the pressure, the more risk-averse people become when it comes to randomizations.
The article To Bluff or Not to Bluff was well written overall. Even though game theorist argues that bluffing is computationally, not psychologically, they still take in to account the stakes of the bluff. I think the last section on High-Stakes Math was a very strong section. Even though the math is there to support the bluff, the psychologically doubt still there. I’m not sure that will ever gone away completely because it human emotions and error.