Summary Of Findings: Game Theory (4 out of 5 Stars)

Note: This post represents the synthesis of the thoughts, procedures and experiences of others as represented in the 12 articles read in advance of (see previous posts) and the discussion among the students and instructor during the Advanced Analytic Techniques class at Mercyhurst College on 22 APR 2009 regarding Game Theory specifically. This technique was evaluated based on its overall validity, simplicity, flexibility and its ability to effectively use unstructured data.

Description:

Game theory is a method based on applied mathematics and economic theory. It can be useful when attempting to analyze (and ultimately predict) the strategic interactions between two or more actors and the way in which their actions influence future decisions. Game theory assumes that all actors are rational, and can be influenced by various individuals and factors. Games typically involve five common elements: players, strategies, rules, outcomes, and payoffs.

Strengths:

-assumes rational actors

-assumes actors will adjust their actions based on the actions of other actors

-not clearly differentiated from role-playing, simulations, and/or decision trees

-very mathematically based (can be intimidating)

-difficult to quantify options, strategies, and motivations

-may not be a valid method to produce an accurate estimation (see Game Theory, Simulated Interaction, and Unaided Judgment For Forecasting Decisions in Conflict: Further Evidence)

--In real world applications, identifying all of the key players and outcomes can be difficult

Weaknesses:

-Visual step-by-step trail to a conclusion/estimate

-Ability to quantify variables in play

-Emphasis on mathematics and scientifc method

-Applicable to multiple fields (economics, conflict, etc)

-90% rate of success according to BDM

How-To:

Game Theory varies in complexity and in application, however, each application has the following in common:

*Establish the players and the complexity of the game being played, so as to understand the rules which govern the players and the game.

*Identify the possible outcomes for the choices the players can make (although this is particularly difficult as not all decisions can be predicted)

*Establish measurable values for predicted outcomes.

*Eliminate dominated strategies and employ dominate strategies. Repeat this step until a clear, singular strategy emerges or equilibrium is reached between the players.

*Employ selected strategy.

Experience:

As a class, we visited www.gametheory.net and played the repeatable version of Prisoner's Delemma under the "Interactive Materials" tab. Each student played the game at their personal computers. Our objective as we played against the five "personalities" was to identify the particular strategies employed by the computer (in addition to scoring the most utility points). Some of the strategies employed by the computers personalities included "tit-for-tat" and "tit-for-two tats."