Can Game Theory Help Decision Makers?
Can game theory help decision makers? “Sometimes” seemed to be the answer, in
a wide-ranging dialogue between Dr. Thomas Schelling, recipient of the 2005 Nobel
Prize in Economics, and William Mayer, senior partner of Park Avenue Equity Partners
and former dean of the Smith School. The discussion was held at the BB&T Colloquium
on Capitalism, Ethics and Leadership on Thursday, November 8, 2012. The annual event,
hosted by the Center for Leadership, Innovation and Change (CLIC), is sponsored
by BB&T and held at the University of Maryland’s Robert H. Smith School of Business.
Shreevardhan Lele, Ralph J. Tyser Distinguished Teaching Fellow of Decision Sciences,
set the stage with a brief overview of the complicated field of game theory. Game
theory is related to both statistics and ethics, said Lele, in that each is a framework
for decision making. The framework of game theory is one in which your wellbeing
depends not just on the decisions you make, but on the decisions those around you
make. Understand and correctly predicting how your competitors will respond to your
moves is a key part of game theory.
Lele illustrated this idea with a numbers game. He chose two random students
on opposite sides of the auditorium and asked each to choose an integer between
1 and 100. If the total of the numbers they chose equaled 100 or less, he would
give them each the amount of their number. If their combined numbers were more than
100, however, neither would receive anything. The students couldn’t consult with
either other, so neither knew what the other would choose. But both students chose
“50” as their number, ensuring each would receive a “fair” amount from the challenge.
“That is something a computer can’t readily understand,” said Lele, explaining
how game theory and ethical frameworks interact. “Fairness or justice are not numerical
During their dialogue, Schelling expanded on why the students both chose “50,”
describing the complexity of anticipating another person’s next moves even while
making one’s own moves. Arriving at a common understanding of the benefits and dangers
that accrue to each player in the game is crucial to making the most beneficial
moves, said Schelling. That is what allows players to deliver a believable threat,
or come to a win-win solution.
Schelling’s examples ranged from his own experiences with designing the Marshall
Plan to the highly charged moves made by global players during the Cuban missile
crisis to some of the diplomatic moves between China and the U.S. Throughout the
discussion, Schelling emphasized the importance of empathy, of understanding the
values and motives of others, as the key to successful game playing. That’s what
also makes it so useful for understanding the interactions we have with those around
us in our everyday lives, said Schelling.
“Game theory isn’t an esoteric, far away, mathematical subject,” Schelling said.
“It is happening all around you every day.”
Frank Auditorium was packed for the event, which included several hundred Smith
students and a group of Smith Terps who work for BB&T. Daniel Waetjen, group/state
president for BB&T’s Greater Washington, D.C., region, welcomed attendees to the
event and spoke appreciatively of the value Smith alumni bring to the company. BB&T
has been a strong supporter of the Smith School for more than 15 years, investing
in student scholarships, the Dingman Center for Entrepreneurship, and academic program
initiatives such as the Undergraduate Fellows Program as well as the Colloquium.
About the Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader
in management education and research. One of 12 colleges and schools at the
University of Maryland, College Park, the Smith School offers undergraduate,
full-time and part-time MBA, executive MBA, MS in business, PhD and executive
education programs, as well as outreach services to the corporate community. The
school offers its degree, custom and certification programs in learning
locations in North America and Asia.