Game theory a critical introduction

Game theory is rapidly becoming established as one of the cornerstones of the social sciences. No longer confined to economics it is spreading fast across each of the disciplines, accompanied by claims that it represents an opportunity to unify the social sciences by providing a foundation for a rational theory of society.

[...]... in games like the one we experienced over the last two years Is it any wonder that this is A Critical Introduction? Lastly, there are the people and the cats: Lucky, Margarita, Pandora, Sue, Thibeau and Tolstoy—thank you Shaun P.Hargreaves Heap Yanis Varoufakis May 1994 xii 1 AN OVERVIEW 1.1 INTRODUCTION 1.1.1 Why study game theory? Game theory is everywhere these days After thrilling a whole generation... extraordinary From crossing the road in traffic, to decisions to disarm, raise prices, give to charity, join a union, produce a commodity, have children, and so on, it seems we will now be able to draw on a single mode of analysis: the theory of games At the outset, we should make clear that we doubt such a claim is warranted This is a critical guide to game theory Make no mistake though, we enjoy game. .. instrumental rationality which are openings to vibrant philosophical debate Why bother to make such reminders? Partially, as we have indicated, because economists seem almost unaware that their foundations are philosophically contentious and partially because it seems to us and others that the only way to render some aspects of game theory coherent is actually by building in a richer notion of rationality... the talk of utility maximisation does not automatically connect neoclassical economics and game 8 AN OVERVIEW theory to traditional utilitarianism (see Box 1.2 on the philosophical origins of instrumental rationality) Ordinal utilities are sufficient in many of the simpler decision problems and games However, there are many other cases where they are not enough Imagine for instance that you are about... probabilistic representations of uncertainty) The distinct disadvantage of this is that it might license almost any kind of action and so could render the instrumental model of action close to vacuous To see the point, if expectations are purely subjective, perhaps any action could result in the analysis of games, since any subjective assessment is as good as another Actually game theory has increasingly... For instance, we may recognise one reason for acting in a particular way, but we can equally recognise the pull of a reason for acting in a contrary fashion Alternatively, we may simply see no reason for acting one way rather than another In such circumstances, Festinger suggests that we experience psychological distress It comes from the dissonance between our self-image as individuals who are authors... to reveal some of these foundational difficulties In 3 GAME THEORY other words, what appear as ‘puzzles’ or ‘tricky issues’ to many game theorists are actually echoes of fundamental philosophical dispute; and so it would be unfortunate to overlook this invitation to more philosophical reflection Secondly, there is a danger that other social sciences will greet game theory as the latest manifestation... belief about the probability of your friend walking is p (p having some value between 0 and 1, e.g 2/3) then your expected utility from walking is 2p and that from driving is 1 Hence an expected utility maximiser will always walk as long as p exceeds 1/2 Game theory follows precisely such a strategy It assumes that it is ‘as if ’ Figure 1.1 11 GAME THEORY you had a cardinal utility function and you act... been a game? In a sense it has The opportunities for conflict abounded within a two-person interaction which would have not generated this book unless strategic compromise was reached and cooperation prevailed In another sense, however, this was definitely no game The point about games is that objectives and rules are known in advance The writing of a book by two authors is a different type of game, ... assumptions: agents are instrumentally rational (section 1.2.1); they have common knowledge of this rationality (section 1.2.2); and they know the rules of the game (section 1.2.3) These assumptions set out where game theory stands on the big questions of the sort ‘who am I, what am I doing here and how can I know about either?’ The first and third are ontological.1 They establish what game theory takes as the . is A Critical Introduction? Lastly, there are the people and the cats: Lucky, Margarita, Pandora, Sue, Thibeau and Tolstoy—thank you. Shaun P.Hargreaves Heap Yanis Varoufakis May 1994 1 1 AN OVERVIEW 1.1. the theory of games. At the outset, we should make clear that we doubt such a claim is warranted. This is a critical guide to game theory. Make no mistake though, we enjoy game theory and have. in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book is available from