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Thursday, June 14, 2007

The Meaning of Game Theory

This article got me thinking about game theory a bit. In particular, when the author writes, "Game theory predicts that the Nash equilibrium will occur when the Traveler's Dilemma is played rationally," he is guilty of a common mistake.

I know many game theorists think game theory should model human behaviour, but they are mistaken. Game theory is a formal system, an abstraction from real decisions in which many factors other than those specified in the game come into play. It is interesting, and can offer some insight into real decisions, but to take it to predict anything about them, or, even worse, that it can stand as a normative judge of a decision's "rationality" or "irrationality, are severe mistakes. Saying "a Nash equilibrium is the rational result in game X" says no more than "If you play this game according to the rules I stipulate, then you will play it according to those rules." There is no reason whatsoever that it is "irrational" for someone facing a real situation like the one described in the article to take into account factors not specified in the abstract definition of the game.

1 comment:

  1. Game Theory actually predicts that someone who tries a "turn the table" strategy, or the "metalogical" strategy to prove that game theory is limited in scope will lose, which is apodictically proven.

    I urge you to check it out, Gene. Any use of the same strategy to refute this game theory is easily dealt with by a simple understanding of the 'trembling hands'.

    Game theory always wins.

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