“This newsletter serves a demographic of highly intelligent readers, and strategic thinkers with a passion for ideas, critical thinking, a passion for game theory, and a desire to understand the world around them. Readers of my posts are usually tired of being patronized elsewhere by fact-less, opinionated know-nothings, misinformation, conspiracy theories, and fake news.
“Knowledge is power, wisdom brings meaning, contentment, and happiness!”
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On a personal note: Please excuse grammatical errors, typos, repetition, and any general nonsense, and such in this post. I am getting a bit older now, and I have about 20,000 pages of information that must get published before I leave the mortal coil. I simply write and publish more than my humble editors are able to correct. If you find enough errors you are welcome to contact me about being an editor of my work.
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A 2 - Minute Read
Q. Lewis, how can you make a wiser decision when you have limited information?
A. I am presenting the answer to this question as an excerpt from the Applied Game Theory Module from my course, the Life Strategies Playbook, and Mentoring Method. You can learn more about the course by clicking the button below.
This is going to get a little complex but if you graduated from high school it will be understandable.
So what is a person to do when they don't know what their partner wants to do?
In Game Theory this called Battle of the Sexes. Let’s frame this for ease, as a hetero-sexual “cis” (man and women relationship).
In game theory, Battle of the Sexes (BoS) is technically called a two-player, imperfect information,non-zero sumcoordination game. I will explain what these terms mean.
To begin, this is an imperfect information game, a type of game where players are simply unaware of the actions chosen by other players. However, they know…
· who the other players are,
· what their possible strategies/actions are and are,
· what their possible strategies/actions are,
· and the preferences/payoffs of these other players.
Hence, information about the other players in imperfect information is complete, meaning there is not enough to know what to do, but it is also clear that there will be no new information arriving. The good news is that in the best-case scenario, all the players can win. That is what makes it a non-zero sum game.
Coordination games are a formalization of the idea of a coordination problem. A coordination problem is a scenario in which all parties can realize mutual gains, but only by making mutually consistent decisions. The big challenge here is that often the agents in a scenario don’t have enough information to make a mutually consistent decision. This problem is dealt with all the time in the social sciences, including economics and in marriage.
Example: Imagine that a man and a woman hope to meet this evening, but have a choice between two events to attend, a prizefight and a ballet. The man would prefer to go to a prizefight. The woman would prefer the ballet. Both would prefer to go to the same event rather than different ones. If they cannot communicate, where should they go? There are a number of simple solutions to this problem, none of them consistent, than better than a random guess. One is called forward induction* which assumes future play will be rational, based on the pattern that past play was rational. In other words, an action that players in a game assume, even when confronted with an unexpected event that their opponents chose. Thus a player does not know what type of choices another player is likely to make (i.e. there is imperfect and asymmetric information). Thus, that player, with limited information may form a belief of what decision another rational player is likely to make, based on observing that player's past actions. A player may elect to signal his type through his actions. Of course, if dealing with an irrational, emotionally driven player, it is extremely difficult to use forward induction.
What do advanced same theory strategists do? Kohlberg and Mertens (1986) introduced the solution concept of Stable equilibrium, a refinement that satisfies forward induction. A counter-example was found where such a stable equilibrium did not satisfy backward induction. To resolve the problem Jean-François Mertens introduced what game theorists now call Mertens-stable equilibrium concept, probably the first solution concept satisfying both forward and backward induction.
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Author: Lewis Harrison is a writer, teacher, and master results-oriented life coach. He is the author of over twenty books, numerous self-improvement and personal development courses, and is the former host of a talk show on NPR Affiliated WIOX91.3 FM. He can be contacted at LewisCoaches@gmail.com
Here is a short video about some of what I am working on in the realm of personal development and self-improvement.
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