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].
- 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 Property Rights
We learn about the Hawk-Dove game, where the pure Nash equilibria revolve around a winner (the Hawk) and a loser (the Dove): the alternatives, which involve either conflict or passivity, make it tempting for at least one player to switch. But, we’ve seen, this raises an additional problem: why would anyone stay in an equilibrium where they are the loser? More generally, when there are several equilibria, which one gets implemented?
Hoffman and Yoeli (see the reading) suggest that the answer lies in uncorrelated equilibria: clear, observable features that players can exploit to decide who plays Hawk and who plays Dove. Chapter 5 of their book argues that everyday ‘rights’ are like peacekeeping conventions: in any hawk-dove confrontation (e.g., over taxi fares, sun-lounger spots, or territory) people (and animals) latch onto arbitrary, payoff-neutral cues like first arrival, continuous possession, or even a color tag to decide who plays Hawk and who yields. Once everyone recognizes the cue, expectations lock in and fights become irrational. With humans courts and constitutions hard-wire the rule, and the resulting equilibrium can feel so natural that even the disadvantaged internalize it. All until two sides invoke incompatible cues, at which point the gloves come off.
Skyrms (see the reading) takes this idea a bit further, by suggesting that such asymmetries can be based on randomization strategies: instead of using who-came-first cues, players can flip a coin to decide who is the Hawk and who is the Dove. This principle is at work in that most mundane of randomization devices, traffic stop-lights, and behind the (important) idea of a correlated equilibrium.
Reading
Hoffman & Yoeli (2022), Chapter 5.
Skyrms (2014), Chapter 4.
Slides
Laurin. Hawk-Dove Games.
Week 7. No Lecture Today
Whit Monday.
Week 8. The Repeated Prisoner’s Dilemma and Mechanisms of Cooperation
We return to the Prisoner’s Dilemma and learn about the dilemma of altruistic behavior. We see that it might make sense to cooperate if players expect to see each other again the next day… and if they expect they’ll get punished if they don’t.
Reading
Hoffman & Yoeli (2022), Chapter 10.
Slides
Adrian. Cooperation and the Repeated Prisoner’s Dilemma.
Bonus
Veritasium (December 23, 2023). What Game Theory Reveals About War and Conflict. Veritasium [Youtube].
- Features the famous Axelrod tournament, which we didn’t get to in class. With a cameo from Robert Axelrod himself!
Week 9. No Lecture Today
Not feeling well, sorry!
Week 10. Kin Selection and WEIRD Psychologies
We stay with the problem of cooperation and study one of the most powerful mechanisms used to explain cooperation in much of the living world: kin selection.
We then see what happens when intensive kinship ties are challenged.
Reading
McElreath & Boyd (2008). Chapter 3, up to (and including) Section 3.3.
Schulz, J. F., Bahrami-Rad, D., Beauchamp, J. P., & Henrich, J. (2019). The Church, intensive kinship, and global psychological variation. Science, 366(6466), eaau5141.
Week 11. Punishment as a Mechanism for Cooperation
Reading
Hoffman & Yoeli (2022), Chapter 11.
Week 12. Costly Signals
We learn about costly signals and how it influences art, fashion and rap.
Reading
Hoffman & Yoeli (2022), Chapter 6.
Hoffman & Yoeli (2022), Chapter 7.
Week 13. The Game Theory of Beliefs
How people treat evidence and decide what to believe.
Reading
Hoffman & Yoeli (2022), Chapter 8.
Hoffman & Yoeli (2022), Chapter 9.
Ideas for essays
Bibliography
- McElreath, R., & Boyd, R. (2008). Mathematical Models of Social Evolution: A Guide for the Perplexed. University of Chicago Press.
- 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.
- Schulz, J. F., Bahrami-Rad, D., Beauchamp, J. P., & Henrich, J. (2019). The Church, intensive kinship, and global psychological variation. Science, 366(6466), eaau5141.
- 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.