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Deciphering Life via Game Theory

In its latest Technology Quarterly section, The Economist published an article entitled “Game Theory In Practice” (September 3, 2011) in which it explores using “game theory” to forecast political and economic events and to resolve disputes.

It seems that Bruce Bueno de Mesquita, an academic at New York University, has used game theory to accurately forecast the downfall of Hosni Mubarak as Egypt’s president, the departure of Pervez Musharraf from office in Pakistan and to predict the successor to Iran’s Ayatollah Khomeini. To do this, he used a computer model based on “game theory” in which numerical values are placed on goals, motivations and the influence of “players” (i.e., negotiators, business leaders, officials et cetera). “The computer model then considers the options open to the various players, determines their likely course of action, evaluates their ability to influence others and hence predicts the course of events.” (Id.) To use Mr. Mubarak’s departure as an example, the computer model considered the following:

Mr. Mubarak’s influence, for example, waned as cuts in American aid threatened his ability to keep cronies in the army and security forces happy. Underemployed citizens then realized that disgruntled officials would be less willing to use violence to put down street protests against the ailing dictator. (Id.)

Other consulting firms have used game theory computer simulations to determine how “best to outfox a trial prosecutor, sway a jury, win support from shareholders or woo alienated voters. . .” (Id.)

But, the one deficit in using such technology is that game theory cannot take emotions into account. Their predictions will go astray when irrational emotions such as hatred overtakes the pursuit of one’s best interests. Where money is the motivating factor, the computer program works well as long as human irrationality does not intervene.

The article describes how computer simulations have been used in auctions, to save bidders money in winning FCC (Federal Communications Commission) radio-spectrum licenses. It saved Time Warner and Comcast approximately $1.2 billion in their bid for licenses.

Computer simulations were also used to find Osama bin Laden’s hideout in Abbottabad, Pakistan.

As expected, and as I mentioned previously in this blog, efforts are underway to develop software to be used in negotiation and in mediation:

Two decades ago Clara Ponsati, a Spanish academic, came up with a clever idea while pondering the arduous Israeli-Palestinian peace process. As negotiators everywhere know, the first side to disclose all that it is willing to sacrifice (or pay) loses considerable bargaining power. Bereft of leverage, it can be pushed back to its bottom line by a clever opponent. But if neither side reveals the concession it is prepared to make, negotiations can stall or collapse. . . in 1992, Dr. Ponsati described how software could be designed to break the impasse.

Rather than using a human mediator to nudge the parties toward common ground, a computer would do this. Negotiating parties would provide the computer with their confidential information on their bargaining position after each round. “Once positions on both sides were no longer mutually exclusive, the software would split the difference and propose an agreement.” (Id.)

Barry O’Neill, at University of California at Los Angeles, has created a model to assist in divorce settlements: Each spouse assigns a numerical value to each household asset, giving a higher or greater value to those particular assets he/she wants to keep. They provide their valuation to the computer software which then does the rest by distributing the asset to the spouse who valued it more.

In my previous blog on this topic, I was concerned that I might become unemployed as a mediator. But I am not so concerned anymore, as I have learned that the best software in the world cannot take into account human nature, irrational emotional behavior, or as I described last week – “difficult” people. Because of this, there will always be a need for a flesh and blood mediator like me!

. . .Just something to think about.


Phyllis Pollack

Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as… MORE >

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