Schelling's Game Theory: How to Make Decisions

By Robert V. Dodge | Go to book overview

CHAPTER 2
Introduction to Strategic Thought

This is a book about decisions. It involves understanding the consequences of choices and, given that foresight into outcomes, deciding between alternatives rationally. The title of the course it outlines is descriptive: Conflict, Cooperation, and Strategy encompasses a spectrum of interactions. Choice is involved in all three. Looking at situations strategically and making intelligent choices is obviously valuable, but often not simple. Methods and skills to improve the ability to make intelligent choices will be introduced through explanation and through cases and problems. This is a theoretical study. It looks at schematic analyses of conflict and cooperation; bargaining, negotiation, and collective decisions; incentives and information; rules and enforcement; secrecy and deceit; threats and promises; interactive and interdependent behavior.

Often some introductory material will be followed by an abstract puzzle or problem. When this is investigated or solved and the abstraction explored, the next step will be to identify activities and real problems that share the structure of the abstraction. Our purpose will be to discover and come to recognize recurring and universal situations, behaviors, and problems. Techniques of blackmail differ in the criminal world, in family management, among nuclear powers, and in law enforcement, but they also have much in common. A threat to a child that there will be no television if his homework is not finished may avail itself of the same analysis as a threat to a country there will be a trade boycott if it exports nuclear technology. Individuals’ decisions on whether to live in segregated or integrated neighborhoods may have the opposite effect than they intend when combined with decisions by others with motives who have similar preferences. Insight into this seemingly counterintuitive result is provided by a simple Schelling game and analysis. We seek practical understanding of these things.

Strategic analysis is central to this presentation. Strategy is involved when we seek to influence or adapt to the behavior that others have adopted or are expected to adopt. Strategic analysis is about situations, not personalities. Situations can be analyzed separately from individuals and their personalities, so connections with virtue and evil are not involved. Situation analysis is neutral and from a disinterested point of view, and keeping analysis focused and detached is critical to success.1

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