SimCity is a great way of showing this effect interactively.
In the simulation, citizens always take the shortest path (individuals try to maximize individual gain), but if you connect your entire city like a grid they avoid high-speed roads, deadlocking the traffic (worst game outcome). If you adopt a city plan full of cul-de-sacs and connect it with high-speed roads like a tree the traffic flows better (best game outcome), even though there are less roads and the individual's commutes are longer.
SimCity is an interesting game to explore the concept of game theory since you don't participate as an actor but rather as the rule maker. It shows how you have to adopt counter-intuitive solutions from an actor viewpoint to enforce the desired outcome (backtracking). Once the conditions are met the simulation converges to what you desire.
A more reasonable model (and why gridded streets work in the real world) would have people who desire to go to different places in the grid.
Grid layouts don't optimize for heavy traffic [1] because drivers choose shorter paths, making it worse for all [2]. In real life you don't have grid layouts without large roads, one-way streets, overpasses and other ways to improve flow.
A tree layout avoids this by directing through traffic to higher-capacity roads without intersections [3]. The downside is that individual commutes get longer. It's just one possible solution, but an interesting one because it improves traffic (removes the Prisioner's dillema) by closing roads (denying options to the game actors).
[1] http://en.wikipedia.org/wiki/Grid_plan#Late_19th_century_to_...
And I think in the cases where the NE are predictive of actual play, then there's something intuitively obvious about the NE, and that you could have arrived at the same conclusions without using the tools and machinery of game theory. This is the point that Ariel Rubenstein makes (http://arielrubinstein.tau.ac.il/papers/74.pdf) when he says that game theory is useless.
That's not to say that I believe that game theory is never useful (for certain limited settings, like repeated auctions, it works well), nor do I think that it can never be useful (recent work in behavioral game theory is promising in my opinion) but I'm skeptical using these counterintuitive claims as examples of its use.
Huh? Game theory is the study of strategy. It's not attempting to describe how people actually behave, but how they should behave if they want to achieve a specific outcome when interacting with other people.
Some games, like second price auctions (under certain assumptions about people's values for the good, and knowledge of their own and other people's values) have so called dominant strategy equalibria. In this case, you can say how a person should act regardless of how others act.
But these scenarios are the exception rather than the rule.
• Shameless self-promotion and "Source" attribution links that all lead to your own YouTube videos will annoy people, but probably get you more traffic.
> Every voting system is manipulable
"Every Voting System is Manipulable" is an exaggeration of the implications of strategic voting. Yes, the Gibbard–Satterthwaite theorem proves that a dishonest vote could profitably exist in any system, however there are already systems where intentionally doing so requires the voter to: 1) Have perfect (or near-perfect) information about exactly how everyone else is voting, and 2) Solve an NP-hard math problem.
When breaking the vote requires more knowledge than any politician has, and more computing power than breaking the cryptography of all the world's banks, I'd say it's not particularly manipulable.
I thought this was an interesting result, so I took a look at the source. It turns out it is a toy problem where the goalie always stops the penelty kick if she guesses right and the kicker always makes the goal if kicking to one side, and misses with some probability when kicking to the other.
This is clearly a toy problem that you can't draw any sort of real world soccer advice from.
You have taken things to an absurd extreme and gotten one result, I can "relax the assumptions" to the opposite extreme and get the opposite result:
Suppose the goalie only blocks 10% of shots when guessing correctly, and the kicker makes 80% to the strong side and 50% to the weak side. In this model it is obviously better to always kick to the strong side.
I believe (not an expert) it is more important to minimize losses that to maximize wins in game theory (cold war roots). Viewed in that light most game theory results are, in fact, extremely intuitive.
That sounds meaningless. Aren't they the same thing? Isn't minimizing losses effectively mean maximizing wins? Give me an example where minimizing losses is not the same as maximizing wins. The only cases where it is not is if you haven't vetted out (or could not vet ) the complete outcome of all possible moves that you can make next, for example chess, where the game tree could be of infinite (or deep enough to process in reasonable time) depth.
But chess programs are coded to try all possible tree paths to a reasonable depth given the time constraints and pick a move that has the best weight/score/winning chances. Not a move that has least losses. From that perspective it is all about maximizing the chances of winning. Although I am sure they are also coded to recognize draw conditions and play for draw if that is more effective. So it is not so dry and cut.
So when you are not sure of the certainty of the outcome of the several possible moves you could make next in a game, the best strategy is to pick the one with maximum winning chances not minimal losses. Especially if you think the opposite party is also going to play to win. Next, if your chances of losing are increasing, then play for draw first and lastly mutual destruction (to force the opposite player to draw)
Even in the 'cold war roots' that you mention, the goal is not just to occupy/conquer the opposite country. The goal is also to do so at minimal loss to ourselves. So "winning" in the game of war "is to conquer enemy country at minimal losses or maintain status quo if the losses would be substantial/irrecoverable". So you are always playing to 'win'.
After that revelation, I started pushing towards longer term incentives to incent better behaviors. "We're only working with a smaller subset of vendors, who can count on repeat business, as long as they don't get kicked out of the club. But they need to make investments in advance to show they're serious."
In general getting clients and partners to repeat games of Prisoner's Dilemma rather than 1-offs is the key to trust, and long term profitability.
