Game theory

In my reading of a few books on social science methods, quantitative methods in the social sciences can be divided into two fields: statistical analysis and mathematical models. In this post, I want to take about an essential field in mathematical models: Game theory. Game theory is when one applies mathematical models to have an understanding of strategic interaction among actors. During my undergraduate study, I took a class on game theory by Prof. Thomas Pitz. The classes, albeit introductory, increased my knowledge of game theory.

According to his lectures, it involves studying mathematical models of conflict and cooperation among rational decision-makers. It is primarily employed in economics, political science, psychology, computer science, logic and biology. From these classes, I was able to create my own simplified taxonomy of game theory.

In these classes, I came to see the relevance and application of game theory. Game theory can be used for decision-making in different strategic scenario with certain subgroups (decision maker). According to a lecture by Thomas Pitz, the relevance includes:

(a) Political Decision Making: It is possible to formalize the conflict between goals such as public health and economic stability. We can also make a comparison of how different countries react to the crisis e.g., using Scenario Bundle Analysis method, developed by Reinhard Selten, which is an interactive semiformal method for conflict analysis.

(b) Interactive Individual Decision Making: “Why do people go to ‘Corona Parties'”? Pitz asked whether this can be rational. It might be possible to use some games from the taxonomy to make a model of that strategic problem.

(c) Decision making for Companies: We can ask what actions firms could take during the corona crisis and try to come up with strategic decision models for variety of branches. This questions can be related to communication, switching to a different market (online markets) or product (e. g. masks), It could also include concrete ways for having access to government financial aid.

(d) Decision making for Institutions: How should a university respond to this crisis? Within which political framework should such decisions be made?

How to apply game-theoretical topics

Step 1: Gain knowledge of facts related to your subjects (background knowledge, descriptive statistics)

Step 2: Describe informally your chosen scenario.

Step 3: Choose a game or a game-theoretical structure as a model.

Step 4: Analyze the model.

Step 5: Give some recommendations for decision maker.