Memorandum
To:
From:
Date:
Subject:
Karen Thompson
Emily Slike
September 21, 2012
Technical Definition of Game Theory
This memo describes the technical definition of game theory. The sections below cover the
audience, problem, purpose, and placement of game theory.
Audience
I am writing for an audience that is new to the field of political science. Game theory is used in
many areas, so it is important to know the basis of what game theory is and how it can be applied
to real world situations to understand the decision making process of different groups.
Problem and Purpose
It will never give an exact answer why people make certain decisions, but rather offer possible
ideas as to why. These games are abstract representations of strategic situations intended to
capture the structure of decision-making problems when each decision-makers expected outcome
is dependent upon what the other person does.
Placement
Game theory can be used in different areas of political science.
1. International Relations: There is extensive use of the models to analyze arms races,
militarized disputes, and treaty compliance.
2. Comparative Politics: Models are used to study democratic transitions and variations of
levels of public goods provision.
Extended Definition
Game theory involves strategic interactions where individual decisions depend on what they
expect the others to do. There are three types of interactions:
1. Coordination Games: easy cooperation
2. Conflict or Zero-Sum Games: gains for some, losses for the others
3. Non-Zero-Sum Games: contains cooperation and conflict
Each type of game has five similar elements. They are:
1. The Players: How many are there and does nature or chance play a role?
2. The set of all possible actions.
3. The information that is available to each player when they are choosing their actions.
4. A description of payoff consequences for all players for every possible combination of
actions chosen by the players.
5. A description of all players’ preferences over the payoffs.
There are multiple “games” that we can look at that game theory involves.
1. Prisoner’s Dilemma: An example of a non-zero sum game because the players’ interests
are not always in direct conflict leaving opportunities for both to gain. The cooperation is
more successful interactions are repeated over time. In the prisoner’s dilemma we focus
on two different prisoners. Each has a choice to either rat out their partner, stay silent, or
come clean.
a. Tit for Tat: cooperate, and do unto others as they do unto you.
The above figure shows what would happen for each decision made.
2. Chicken: Derived from the game played with cars. Drivers in separate cars will drive
towards one another, and the first that swerves out of the way is considered to be the
“chicken.” This can be shown when looking at the Cold War. The USSR and the US were
waiting for the other side to back down, both sides backed down and neither were
chicken or neither side backed down and nuclear war would have resulted, but each side
wanted to drive on and the opponent to swerve.
3. Stag Hunt: The problem is how to get two parties to cooperate when the temptation to
“go rogue” is present. If both parties cooperate they will gain a large reward (a stag), but
if they do not then the reward will be less (a hare). An example of this is numerous
municipalities working on transit systems. Each could create its own transit system, but
an integrated one would provide greater value. This game implies there are increasing
returns in social cooperation but cooperation requires ability to make commitment to a
course of action.