Sunday, March 28, 2010

Game Theory PSA

This post is a sort of PSA for all those students out there that are just getting to know game theory and find themselves utterly consternated and dismayed that game theorists seem to assume we're all just selfish, ruthless, back-stabbing bastards.

The deal is this. One of the biggest fallacies in game theory is that people get too caught up in the story. Really speaking, in game theory the numbers (payoffs) don't just represent money/years in prison/etc., but rather all relevant consequences of the decision. That means the payoffs are supposed to have already factored in potential guilt, or charity, or altruism, or social norms, or shortsightedness. If someone finds that people don't play Nash Equilibrium because they feel guilty about screwing other people over, they tend to believe that "all of game theory is wrong;" but really, it's just that the payoffs didn't take everything into account, and so weren't valued correctly. This means, of course, that the payoffs are super-subjective and super-difficult to quantify. Game theorists can use deviations from the cold, ruthless version of Nash Equilibrium (e.g. only caring about money) to try to understand what emotions influence cooperative play, but they never think that the players themselves are violating all theory. Then what's the point of the theory? The theory tells me, given a certain ranking of outcomes, how I can and should maneuver. But I have to come up with the rankings first, and that's entirely up to me.

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