Here are the 5 main points to take from the ‘an introduction to Game Theory’ MOOC on coursera.
- Game theory provides a governing principle that can be applied to all social problem.
-Every social problem can be formulated as a game.
-Nash Equilibrium then finds the mutual best reply for each player within the game.
- Nash Equilibrium can emerge for multiple reasons
-This is because there is an entire spectrum of rationality, from zero-intelligence to hyper rationality.
-Three ways through which it can occur: through hyper rationality, trial and error adjustment and pre-play communication
- The predictive power of game theory varies across applications
-Not always entirely accurate. Depends on the game. More accurate with determining traffic allocation than political parties’ policies.
- Although game theory’s predictive power isn’t perfect, it is still useful
-Does provide insights into motivations of individuals (e.g. political parties tend to gravitate towards rivals policies to steal votes)
-Provides a useful benchmark on which to base analysis
- Conflict exists between group rationality and individual rationality
-In the case of polluting and climate change. Group rationality to stop polluting, so as to slow climate change. Individual rationality if each country is to pollute, to maximise economic pay-off.
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