Trade wars. Fighting global warming. The exploitation of international waters. These headlines have at least two things in common: they are some of the problems we face today. They are also problems with a complex webs of actions and effects, with many active, strategic parties. Despite its playful name, game theory has been immensely useful for a wide range of fields and problems from auctions to voting and revolutionised (micro)economics. Games can model a wide range of complex conflict situations.
How can a field be so universally useful? Well, the „trick” is to discover general patterns and translate and solve the real-life problem in an abstract, mathematical form. While the problem at hand may be original, the by now rich toolbox of game theory may be able to solve the stripped-down model, the game. The solution can, at last, be dressed up, be reinterpreted in the original setting.
While some think that the entire field of game theory is about the prisoners’ dilemma, in reality there are a number of basic game forms, each having a handful of alternative solutions of which one is chosen depending on the purpose of the analysis. The objective of this module is to gain a basic understanding of strategic decision making, familiarise yourselves with the simple models used in game theory as well as some of the applications.