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october 10, 2005, the royal swedish academy of sciences awarded the bank of sweden prize in economic sciences (also known as the nobel prize of economics) to robert a. aumann and thomas c. schelling "for having enhanced our understanding of conflict and cooperation through game-theory analysis".
schelling's most prominent work detailing this research is "the strategy of conflict" (1960), in which he details his game theories and introduces a rational choice model as a means for negotiating. sound dry so far? seem too abstract for your taste?
i thought so, too. but this afternoon, i managed (with the help of my professor and classmates) to find a heart in schelling's work. i may have even found a new way to amuse myself next time i'm at the pub with my people.
in essence, game theory studies how parties make decisions when the costs and benefits of each option are not fixed but rather depend upon the choices of the individuals involved. the game of chess is a perfect example.
by applying game theory to fields like politics, one can easily see how international negotiations are often just a more complex game of chess. or rather, international negotiations are just a game of chess with higher stakes. take for example a negotiation between agent A and agent B. If agent A does not act according to agent B's conventional assumptions about the rules of the "game," B will consider A's behavior irrational. during the "game," B will thus be uncertain about the trajectory of A's behavior. From B's point of view, A's behavior is ambiguous and unpredictable. Thus A's irrationality might result in A winning the "competition." If agent A is not really irrational but is using his unconventional behavior as part of conscious bargaining or competitive strategy, then his so-called irrationality is effectively rational in relation to the "game's" pay-offs.
pretty tricky if you ask me. according to schelling's model, one can communicate total credibility by showing he's not in control. one is pretty likely to win at the game of "chicken," schelling contends, if he manages to throw out his steering wheel first. furthermore, calm and cool sensibilities, a laying of everything out on the table, is not always the best way for one to get what he wants. schelling seemingly places value on deceit.
nobel prize-worthy, you ask? this may at first glance seem rather outdated, if not sort of despicable. but consider the fact that, during the cold war era, the united states and the soviet union largely deterred each other from launching nuclear attack based on schelling's model.
you've likely noticed by now how schelling values what is NOT said in negotiations almost as much as he values what IS said. (he certainly emphasizes the importance of tacit bargaining - bargaining without talking - as well as focal point solutions - focusing on what is easy and obvious given the context of the situation.)
now to the like-minded game you can play with your buddies at the bar. or with your family on a long car trip. it's not unlike that washed-up game show "family feud," actually. just one more example of how dazzling schelling's work can be.
the object of this game is basically to guess what the others in your group are thinking. in our class, for example, we pretended that we would meet as a group in washington, DC. if i had to predict without prior communication where the others would likely go to meet the class, and thus where i would go, where would i pick? (by the way, most of the americans in our class, including me, said they would meet at the washington monument, while most of the international students in the class thought it most sensical to meet at the white house.)
our professor gave us numerous other examples to try, too. what if, as an american spy abroad, you had to meet your spy counterpart to exchange information? what if you had only one chance to choose the proper code word to identify yourself to your counterpart and not blow your cover? would you choose a) canary, b) robin, c) eagle, d) woodchuck, or e) blue jay?
in case you're interested, our class was split on "eagle" and "woodchuck." and i chose "canary."