How Decision Making is Actually Science: Game Theory Explained

When you’re hanging out with your friends, you probably don’t think too hard about

the math behind the decisions you’re making.

But there’s a whole field of math — and science — that applies to social interactions.

It’s called Game Theory.

Game theory was pioneered in the 1950s by mathematician John Nash, the guy from that

Russell Crowe played in A Beautiful Mind.

But game theory isn’t about games the way we normally think about them.

Instead, a game is any interaction between multiple people in which each person’s payoff

is affected by the decisions made by others.

So, sure, that could apply to a game of poker.

But it could also apply to practically any situation where people get together and get

up in each other’s business.

Like, did you interact with anyone today?

Well, you can probably analyze the decisions you made using game theory.

Game theory is incredibly wide-ranging, and it’s used all the time by economists, political

scientists, biologists, military tacticians, and psychologists, to name just a few.

Game theory has two main branches: cooperative, and noncooperative, or competitive, game theory.

Noncooperative game theory covers competitive social interactions, where there will be some

winners … and some losers.

Probably the most famous thought experiment in competitive game theory is the Prisoner’s

Dilemma.

The prisoner’s dilemma describes a game — a social interaction — that involves

two prisoners.

We’ll call them Wanda and Fred.

Wanda and Fred were arrested fleeing from the scene of a crime, and based on the evidence

the police have already collected, they’re going to have to spend two years in jail.

But, the DA wants more.

So he offers them both a deal: if you confess to the crime, and your partner does not, you’ll

be granted immunity for cooperating.

You’ll be free to go.

Your partner, though, will serve ten years in jail.

If you both confess, and dish up loads of dirt about each other, then you will both

end up spending five years in jail.

But if neither of you confess, you’ll both spend only two years in jail.

Those are their options.

Then, Wanda and Fred are split up.

They don’t know what their partner is going to do.

They have to make their decisions independently.