Real Life Games: How Game Theory Shapes Human Decisions
We will explore how game theory, the study of strategic decision-making, can be used to explain and predict human behavior across various contexts. Why are we sometimes willing to pay inordinate sums of money for a wrist-watch that tells the time as well as our phones? What explains feuds and long cycles of retaliation? And what is the best way to take a penalty shot? We will see how behaviors that seems puzzling, bizarre, or even irrational reflect some form of strategic thinking, when viewed through a game theory lens. By analyzing real-world scenarios, we will discover how concepts like Nash equilibrium, cooperation, and competition reveal the underlying logic of human choices.
Week 1. Intro and Our First Game
We kick things off by introducing ourselves, followed by a breakdown of the logistics of the course. And then we play our first game, where we try to guess what others are guessing.
Slides
Adrian. Logistics.
Adrian. Can You Guess 2/3 of the Average?.
Week 2. The Trust Game and Games in Normal Form
We start by playing the Trust Game, and learn about how behavior in the game varies across the world.
We then dive into the basics of game theory. We start by defining what a game is, and then look at key notions: strategies (your game plan), payoffs (what you get out of it), and Nash equilibria (where everyone’s made their move and no one has a reason to change).
Slides
Adrian. Game Theory: Games in Normal Form and Pure Nash Equilibria.
Week 3. The Ultimatum Game and Pareto Optimality
We play the Ultimatum Game, and learn about Pareto optimality and social dilemmas.
Slides
Adrian. The Ultimatum Game & Pareto Optimality.
Week 4: Mixed Strategies
Sometimes pure strategies are useless, and what you want to do is be unpredictable. We learn about mixed strategies and see why John Nash got a Nobel prize.
Slides
Adrian. Mixed Strategies and Mixed Equilibria.
Bonus
Fridman, L. [@lexfridman]. (2018, December 28). Tuomas Sandholm: Poker and Game Theory. Lex Fridman Podcast #12 [YouTube].
- About the video: Lex Fridman talks to Tuomas Sandholm, who led a team that created an artificial agent for playing Texas Hold’em Poker. The link points to a specific moment where Sandholm discusses the Nash equilibrium and its crucial role in ensuring the success of the agent, though the entire interview is very interesting.
Week 5. Mixed Strategies in Penalty Shootouts
We see how mixed Nash equilibria are useful in understanding penalty shootouts.
Reading
Palacios-Huerta, I. (2014), Chapter 1.
Slides
Adrian. Penalty Shootouts and The Minimax Theorem.
Bonus
Palacios-Huerta, I. (2017, October 17). Beautiful Game Theory, Beautiful Economics. TEDxUDeusto [Youtube].
Are Football Players Game Theorists? Scoring the Perfect Penalty, with Ben Lyttleton (2022, November 22). In Game Changers: The Game Theory Podcast.
Week 6. The Hawk-Dove Game and the Emergence of Rights
We learn about the Hawk-Dove game and its role in the emergence of property rights.
Reading
Hoffman & Yoeli (2022), Chapter 5.
Skyrms (2014), Chapter 4.
Week 7. No Lecture Today
Whit Monday.
Week 8. Costly Signaling
We learn about costly signals and how it influences art, fashion and rap.
Hoffman & Yoeli (2022), Chapter 6.
Hoffman & Yoeli (2022), Chapter 7.
Week 9. Evidence Gmes
How people treat evidence and decide what to believe.
Hoffman & Yoeli (2022), Chapter 8.
Hoffman & Yoeli (2022), Chapter 9.
Week 10. The Prisoner’s Dilemma and Cooperation
We learn about the dilemma of altruistic behavior through the Prisoner’s Dilemma.
Hoffman & Yoeli (2022), Chapter 10.
Hoffman & Yoeli (2022), Chapter 11.
Week 11. Categorical Norms
We learn about why norms are categorical.
Hoffman & Yoeli (2022), Chapter 12.
Hoffman & Yoeli (2022), Chapter 13.
Week 12. Subgame Perfection and Justice
How our justice sense is influenced by the idea of subgame perfection.
Hoffman & Yoeli (2022), Chapter 14.
Week 13.
TBD.
Ideas for essays
Bibliography
- Easley, D., & Kleinberg, J. (2010). Networks, Crowds, and Markets. Cambridge University Press.
- Palacios-Huerta, I. (2014). Beautiful Game Theory: How Soccer Can Help Economics. Princeton University Press.
- Skyrms, B. (2014). Evolution of the Social Contract (2nd ed.). Cambridge University Press.
- Hoffman, M., & Yoeli, E. (2022). Hidden Games: The Surprising Power of Game Theory to Explain Irrational Human Behavior. Basic Books.
- Carpenter, J., & Robbett, A. (2022). Game Theory and Behavior. MIT Press.