Formal analysis of the behavior of two parties with divergent interests in
situations that can be described by rules. For example, the Prisoner's Dilemma is one of the more popular
of the games that have been studied. Game theoretic analysis seems to provide insight into
historical situations involving conflict and cooperation,
as shown by Nalebuff and Brandenburger (1996) who describe such situations. To be useful,
however, analysis must be done in advance of the outcome, and this is likely to
be difficult. In effect, a game theorist must describe a game that is analogous
to the target situation.
There has been ample time to research
game theory. For example, the Nash equilibrium was described by Zeuthen in 1930
and the special case duopoly model was published by Cournot in 1838, both well
before Nash’s work was published in 1951 (Kaul & Fox, 1994). (Those who know
Stigler’s Law will not find it strange that the concept is called the Nash
equilibrium). Yet little of the
enormous effort devoted to research on game theory has been concerned with
forecasting validity. Even as far back as 1960, Janowitz wrote that "a social
science theory… based upon game theory appears to be an unfulfilled promise for
it has not produced hypotheses and understanding beyond common sense" (Brandis,
1964). The research that does exist shows that simulated interaction
provides more accurate predictions in situations that involve conflicts among
the roles of the parties involved (Green, 2002). Another method,
structured analogies, uses analogous real situations rather than an
analogous game to forecast the outcome of a target situation. To date, however,
little research has been done on the use of structured analogies.
- Brandis, R. (1964), "Game theory" in J. Gould &
W. L. Kolb (eds.), A Dictionary of the Social Sciences. London:
- Kaul, T. K. & K. A. Fox (1994), "Game theory,
economic applications" in D. Greenwald (ed.), The McGraw-Hill Encyclopedia
of Economics, 2nd ed., New York: McGraw-Hill.
- Nalebuff, B. J. & A. M. Brandenburger (1996),
Co-opetition. New York: Doubleday.