Applicable Game Theory Chapter One : The Concepts of Game Theory

Abstract

Game theory has been variously described as the science of strategy or that of conflict resolution. At its core, it has the characteristics of a mathematical construct: a clear set of concepts and assumptions, fundamental theorems, and applications to real world issues. The fact that the issues in question are mostly the domains of the social sciences, however, places game theory in a peculiar position compared to other mathematical and scientific disciplines. Even if one looks beyond the widespread disbelief among social scientists that human and social behavior is amenable to mathematical analysis, the rational choice assumption that lies at the core of game theory leads to a fundamental debate: is the purpose of the theory a description of an independent reality or is it merely a set of prescriptions about what that reality could be in an ideal world of human rationality? Indeed, even the game theoretic concept of rationality is more specialized than conventional wisdom would suggest. Although reason is of course involved in game theoretic rationality, it is focused on the pursuit of happiness by egoistic decision makers. Altruism is hardly a game theoretic motive, but it could very well arise as the outcome of a cost benefit analysis. For the game theorist, every social behavior could be viewed as calculated self-interest.