When two or more people get together, things gets complicated. Game theory is the study of what happens when humans compete and coordinate to get ahead, both as individuals and as groups.
David McAdams has written a clear and clever introduction to the subject. He shows us how to understand basic game theory models and applies them to complex and varied problems. The variety of situations that game theory can explain reveals its utility. From eBay buyer feedback to convincing your children to eat vegetables with dinner, a bit of strategic thinking goes a long way.
McAdams teaches at the Duke Fuqua School of Business in Durham, North Carolina. He writes very grown-up, abstruse economics papers in technical journals. But Game-Changer is lucid and straightforward. Interactions can go better if certain rules are followed or disregarded. Understanding payoffs helps you navigate complex situations. Thinking about incentives at an individual and organisational level can help you to make better decisions.
Like many introductory texts on game theory, McAdams pays most attention to the Prisoners’ Dilemma. It is true that this is perhaps the easiest model to grasp, and has a wide and surprising array of applications. There is more to game theory than just this model, as McAdams knows well, but readers of the book will mainly find themselves able to spot collective action problems soluble by coördination, cartelisation, or regulation.
McAdams thinks we can become what he calls “Game-Changers” by thinking about strategies, and realising that there are options available to us we hadn’t already seen.
Whether game theory can change your life is another question. Seeing game theory in day-to-day life can be useful: it can help you see strategies you might not have seen before. But most sportspeople, financiers, market traders, businesspeople, generals and con artists often instinctively “get” the rules of games, and successful strategies anyway – without needing to think explicitly about payoff matrices and rules. It’s often a bit of extra cognitive effort to apply the models of game theory to what you may already grasp.
q&a immune resistance
Show me some game theory in action.
McAdams comes up with a plan for arresting the progress of antibiotic-resistant tuberculosis. The spectre of an untreatable strain of this and other bacteria greatly worries the World Health Organization, who fear that a disease that plagued Europe in the 18th and 19th Century could be just as lethal in the future.
And what does he propose?
McAdams splits the cycle of infection into three stages: infection, transmission, and treatment. Noting that antibiotic resistant strains of tuberculosis tend to beat both doctors and other strains of tuberculosis at the treatment stage, he suggests strategies to prevent infection and transmission. Tools for quicker diagnosis should be used so that resistant strains can be defeated by the right drug, he says, and infected patients should be isolated as quickly as possible, while epidemiological data should be used to find out exactly who the patient came into contact with and give them antibiotics to stave off infection.
And what kind of game theory model is he using?
Many. In the real world, it’s hard just to apply a single model: you have to develop complex models on the fly. So developing countries’ hospitals’ incentives to tackle tuberculosis is a Prisoners’ Dilemma – they’d all be better off if everyone adopted policies to increase tuberculosis screening, but none of them is individually better off doing so if no one else does. But the infection, transmission, and treatment games are modelled separately. Each is a multivariable game that isn’t put into a nice, easy-to-read box.
He’d make a good management consultant.
He just teaches them – on the MBA course at Duke University.
abouyamourn@thenational.ae
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