THREE academics are to share the pounds 590,000 Nobel prize for economics for their pioneering work in "game theory". This has helped explain why workers go on strike, why politicians break their promises and why you can often wait ages for a bus only for two or three to turn up at once.
John C Hasranyi, of the University of California at Berkeley, John F Nash, of Princeton University, and Reinhard Selten, of the University of Bonn, were awarded the prize by the beleaguered Swedish central bank in memory of Alfred Nobel, industrialist and inventor of dynamite.
Game theorists argue that traditional economists dismiss individual consumers and companies unrealistically as the powerless victims of market forces. In traditional theory, for example, firms cannot charge more than the "market" price for their goods. If they do, all their customers can buy exactly the same product more cheaply from their rivals.
Game theory recognises that companies, trade unions, governments and central banks in fact fight complex strategic battles with each other. No organisation dare make an important decision - say cutting the price of a newspaper - without considering how the other players in the "game" will react. …