Introduction
Human interactions can be just like games. Game theory is an approach that attempts to analyze situations the same way players in a game assess situations. We face many situations, yet we do not have rules on how to handle them. Hence we wonder, what players would do if they were faced with the same situation. In a game, players make quick and strategic decisions that will help their team win. We handle real life situations just like players. The decisions we make affects our outcomes. Since we come in contact with people, game theory establishes how we can strategize with others just like the interdependence among players. Game theory talks about elements of games, types, strategies and other concepts that can be used in making strategic decisions in various disciplines. This paper will establish various aspects of game theory, and look at its application in real life.
Elements of game theory basically describe basic terms used in game theory. They include; game, players, playoffs, actions and strategies. The game generally refers to the situation at hand; it also includes the rules of the game. Players represent people faced by a situation/ game. Players are the decision makers. Payoffs refer to the outcome of the game, particularly the positive outcomes. Action is an element of a game that represents possible choices that can be made by the player. Strategies are the rules of the game that guide a player on the actions to take (Bornstein et. al. 603). An example of how we apply game theory in social situation is seen in the following scenario. When asking a girl out on a date we are usually armed with strategies that will help us win her over. The payoff will be finally realized when we go out and have a good time with that girl.
There are basic assumptions in game theory. The players should be rational, and they should have knowledge regarding the situation. Another basic assumption in game theory is that there should be no outside communication. Players will only communicate through action. Players should be knowledgeable about the game. Players should know the necessary actions and strategies, and they should know about payoffs (Osborne 67).
Types of games
There are several different kinds of games in the game theory. Zero-sum game represents a game in which players have conflicting interests. For instance, in a basketball match one team will win, while the other loses. In a zero-sum game, there is no equilibrium as only one player will win. An election is a real life example of a zero-sum game. In 2012 presidential election, Obama was the winner whereas Romney was the loser. Poker is a zero-sum game as
Non-zero sum game is a type of game in which both players can gain because their interests are not in direct conflict. For instance, when I and my siblings find ourselves in trouble, if we decide not to tell on each other, we all benefit.
Simultaneous game is a type of game in which players act by anticipating the actions of other players. In a simultaneous game, players are not aware of the strategies being used by other players. The game is simultaneous in that both players take actions only by anticipating actions of another player. A current situation that demonstrates a simultaneous game situation is the cut throat competition in the smart phone market. Before any developer unleashes a new smart phone, they anticipate the activities of other players and they try to outdo each other by designing superior features. Samsung Galaxy series has been in a simultaneous game kind of competition with the IPhone.
A sequential move game is a type of game in which players act in a particular order. The activities of one player will determine the move for the other player. In the political world, especially during campaigns, candidates usually wait for the move of their competitor so that they can make a move. Other games are one-shot games and repeated games (Harsanyi & Reinhard 98).
Types of strategies
There are different strategies that can be employed in a game theory. Strategy is a complete set of actions that guide a player’s actions. Strategy is made of several moves. Strategy is also referred to as a game plan. There are two types of strategies, namely pure and mixed strategies. A pure strategy entails many methods that will be used by players during the game. Pure strategies are usually comprehensive, and they weigh the advantages and disadvantages associated with every move (Fosters & Young 87).
A mixed strategy is a strategy over pure strategy. Mixed strategy try to counter the actions involved in a pure strategy. A pure strategy has a probability against it, and is represented by the mixed strategy. Some players can opt to counter the moves of their opponents instead of coming up with their own pure strategies
Equilibrium
Equilibrium in the game theory represents a situation in which players have no reason to change strategies after analyzing the opponent’s strategies. In equilibrium, the payoff will be equal for both players even if they change their strategies. In an equilibrium situation, if players chose strategy A, they will end up with a certain similar payoff, if they choose strategy B; they will also end up with the same payoff (Fosters & Young 87). We are faced with equilibrium situation in our daily lives and we have to settle for something that will please both players. For instance, my parents only agreed to buy me a car if I would have to pick my small brother from baseball practice daily since they have other activities, I refused the offer but they did not give in, eventually I accepted it because I needed the car.
The prisoner’s dilemma
The prisoner’s dilemma is a concept that we see often in the detective movies. It talks about a situation in which two prisoners are confined in different places. Both prisoners value their freedom, but also care for the other prisoner. However, the interrogator will approach them with an offer. Prisoners will be told to betray each other for a minimum sentence. If prisoner A betrays prisoner B, prisoner A will have a shorter sentence. But if both of them cooperate, they will both have shorter sentences. If both prisoners remain silent, there will be no evidence hence they will have shorter jail terms.
The prisoner’s dilemma is seen in the economic world. For instance, in a competition between Pepsi and Coca cola, they can both decide on a high price and make a lot of profit. But if one brand sets a competitive price, which is lower than that of the rival, that brand will benefit more than the other, which is just like a shorter jail term in prisoner’s dilemma.
The tragedy of commons
The tragedy of commons represents the situation in which individuals maximize on common resources. There are common resources in society that we share, and if the demand increases it overwhelms the supply such that it will no longer be beneficial to the society. For instance, in farmers had a communal land for herding sheep, if one increases the number of sheep it will affect the wellbeing of others. The tragedy of commons is a concept that we see a lot in the society. For instance, in public education system there is usually a lot of students using limited resources such that the education system fails to provide them with meaningful education.
Utility
In a game, different players have different motivations. Utility is a term that describes what motivates players. For instance, when we take part in something, we usually have different reasons behind it.
Concepts of game theory in real life
After looking at the concepts of game theory, it is obvious that the theory affects our interactions. If we apply game theory principles, we can easily expose the traps we get ourselves into. Game theory can help in dealing with personal issues, family problems and even in dealing with international relations issues. Game theory deals with the following issues that we face in real life:
What does it mean to choose strategies "rationally" when outcomes depend on the strategies chosen by others and when information is incomplete?
In game theory, strategies are a set of moves that players will apply in order to gain optimal payoff. Players can access limited strategies when they are playing. In game theory, rationally means ability to choose strategies that are complete and transitive. Rationality is the ability to choose strategies that are continuous and interdependent.
If all information was availed to the players, then the “situation” will not qualify as a game. Players are rational; hence they should have a number of strategies in their fingertips. A player will chose the best strategy that will enable fellow players to continue/ enhance the game. For instance, if I have an enemy, my friends will not be friendly with my enemy because they are loyal to me. This does not mean that I tell my friends that my enemies should be their enemies, but they think rationally.
Even with lack of enough information, a group of players will devise enough strategies that will keep the team together. In social interaction, we define rationality along with knowledge and beliefs. Rationality is guided by our beliefs, and it will define the strategies we chose.
How does game theory apply to personal relationships, especially ongoing ones?
Game theory applies in our personal lives in many occasions. For instance, the way I relate with my girlfriend is definitely affected by the principles of game theory. For our relationship to work we have to trust each other, and show some vulnerability but I have to be careful not to be too vulnerable. If I expose my vulnerability, I will put myself at a risk in that my girlfriend can decide to go against me like in the case of prisoner’s dilemma.
I have also seen the principles of game theory in my parent’s marriage. Marriage is a form of cooperation, and what keeps it working is self-interest. My father has his own interests, same as my mother hence they stick together for their mutual benefits. My father is the provider, whereas my mother manages the household. Even us kids, we have our own chores and if we do not do them our privileges are stripped off. Hence, this cooperation works well and at the same time we maximize our payoffs.
When my parents were getting me a car, the way they negotiated with the dealer depicted most aspects of the game theory. My parents wanted the lowest price, yet the dealer was trying to protect his interests. My parents argued that the other dealers were selling it cheaper; the dealer had to reduce his price so as to beat the other dealers. Even when am buying something such as clothes or phones, I bargain by using the same strategy so as to get the best price. Game theory affects how we purchase stuff, and the way sellers price their stuff.
In what circumstances is aggression rational and in what circumstances is cooperation rational?
Game theory talks about cooperative and non-cooperative games. From these types of game, we learn various approaches in particularly aggression and cooperation. Depending on the situation, a strategy that will yield optimum payoff should be taken.
Aggression and cooperation can be seen in the case of war. During cold war/ world war certain countries cooperated so as to fight a common enemy. The countries that cooperated would benefit in terms of protection. Countries remained aggressive to other countries that threatened their security.
In our daily lives, we find ourselves compromising on situations we cannot handle. For instance, when the teacher threatens to suspend me for bad behavior, the best option is to cooperate with the teacher because suspension is not good. However, when we believe in certain things we fight for them. If somebody threatens my siblings, I will do whatever is necessary in order to defend them.
Cooperation is best described by the equilibrium concept in game theory. In a cooperative situation, both players will benefit.
What is the value of flexibility, or of voluntarily giving up flexibility?
Flexibility is an important concept in decision making. Flexibility creates an option value in that when one is flexible, he can make the best out of different situations. Flexibility is about keeping an open mind. Game theory is about having a number of strategies that will lead to the best outcome.
If we approach issues with the same mindset, then we will make the wrong decisions at some point. With a flexible mind, we will learn how to optimize on certain situations. For instance, the way I communicate with my friends is totally different from the way I communicate with my parents. Being flexible enables us to maintain various relationships in our lives.
Flexibility teaches us to react differently to certain situations, and when in certain situations giving up flexibility can be the best option.
Can moral rules of cooperation emerge spontaneously from the interactions of rational egoists?
Moral rules of cooperation state that we should what is in best interest of others, while game theory is about putting our self-interests first.
Rational egoism is just like game theory as it believes that individual self-interest should be put first. Rational egoists believe that actions should be rational and it should maximize personal gain.
Rules of cooperation can emerge spontaneously from the interactions of rational egoists. In as much as rational egoists put their needs first, when they are in a group situation they will play by the rules of cooperation so that they can all benefit (Osborne 54).
What does it mean to be allocentric? How will being allocentric help in your personal and social life?
Allocentrism means putting the interests of other people before self-interests. Game theory insists on finding avenues of cooperation when it is the best option. Allocentrism allows players to put themselves in their opponent’s shoes. This is seen in the business world; when firms come together in order to protect their mutual interest.
Allocentrism is a good virtue in real life. It makes us more understanding of others, because we get to view situations according to their perspectives. Being allocentric will foster our personal and social life. Through allocentrism we make more friends, hence a better social life. (Kosgaard 75).
Conclusion
Game theory should be applied in making real life decisions since it makes us think of the consequences of our actions. Game theory algorithm is more efficient than making decisions based on popular assumptions. However, game theory should be accompanied with other decision making techniques. Game theory offers simple and easy concepts that will help us the make the best of every situation.
Works cited
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Duffy, J. Lecture Notes: Elements of a Game. 2010, http://www.pitt.edu/~jduffy/econ1200/Lect01_Slides.pd
Foster, D. and H. Young. Learning, hypothesis testing, and Nash equilibria. Games and Economic Behavior, 45 (2003) 73-96.
Harsanyi, John C., & Reinhard Selten. A General Theory of Equilibrium Selection in Games. Cambridge, MA: MIT Press. 1998, Print
Korsgaard, C, 2005, “The Myth of Egoism,” in Practical Conflicts: New Philosophical Essays, ed. P. Baumann and M. Betzler, Cambridge: Cambridge University Press, 59–91.
Osborne, Martin. An Introduction to Game Theory. New York: Oxford University Press, 2003. Print
