UNDERSTAND GAME DRIVERS

If it was antagonistic and not cooperative, they will take the necessary action to punish you in subsequent games or situations. Your opponent will remember what you did last time or how you behaved in a given situation. However, if you are going to play over and over again, or you need an ongoing relationship with your opponent, then you need to be more careful. In other words, if you are only going to play once, then you can go for the best possible outcome for you, and ignore the other person. Game theorists generally put this down to the idea of repeated games and reputation. However, over and over again in this type of game, people are far more cooperative in practice than the theory would predict. The expected outcome is therefore that both will betray each other, and end up with a two-year sentence. On an individual basis, however, betraying the other makes more sense, because they will go free. It is clear that the best possible outcome for both is therefore silence. If both betray the other, they will both receive a two-year sentence. If one betrays the other, the speaker will be released, and the betrayed person will receive a three-year sentence. If both stay silent, they will each receive a short sentence (one year). In this game, two prisoners are able to either stay silent or betray the other. One of the classic ‘games’ is the prisoners’ dilemma. In this game, therefore, there are two possible solutions: Tie/Tie and Crash/Crash, and both are equally like to happen.Įconomists call this a double Nash Equilibrium, after the economist who identified the idea of an equilibrium: a solution that was more likely to happen because of the benefits to both players. However, if both players think this way, a crash will inevitably result. The result will be a tie.īecause you can assume that the other player will swerve to avoid a crash, it is entirely rational not to swerve. Looked at rationally, therefore, you can say that both players are likely to swerve, because the consequences of a crash are so severe. The key to the game is to understand that Win is better than Tie, Tie is better than Lose, and both are better than Crash. Here is the decision matrix for the game: If both players keep going, they will crash.

If they swerve, they will go off the road and therefore take longer, but will avoid a crash. Each has a choice when they meet: to swerve or to keep going.

UNDERSTAND GAME DRIVERS

In this game, two drivers are driving down a single-track road (or across a narrow bridge) in opposite directions. Game theory is probably best understood with an example such as the game of ‘chicken’. Game theory applies a simple matrix to situations: Of course nothing in life is truly simple, but you can usually consider organisational situations in this way. Generally, game theory is easiest to apply to two-person or two-organisation games, with just a couple of alternative actions, because it keeps things simple. It is therefore perhaps best considered as the science of reasoned decision-making, or logic applied to decision-making. It was originally applied to situations where one player had to win and others lose, but it is now used more widely for all kinds of cooperation behaviour. It applies mathematical modelling techniques to the study of human behaviour, and particularly to conflict and cooperation. Game theory started out as a look at how people behave when they are playing games. They compromise, and accept a lesser outcome, for example, to avoid conflict, or because the consequences of poor behaviour are too extreme. They may, therefore, end up with a less optimal outcome, simply because they know how others are likely to behave. The principle behind game theory is that people behave rationally, and make decisions based on the best possible outcome for them, given the likely behaviour of others. Game Theory is a technique used to understand how and why people make rational decisions.Īlthough often considered applicable to economics, it has also been used in biology to understand evolution, and more recently applied to business and decision-making by customers and others.

Understand game