Schelling's Game Theory: How to Make Decisions

Schelling's Game Theory: How to Make Decisions

Schelling's Game Theory: How to Make Decisions

Schelling's Game Theory: How to Make Decisions


Thomas Schelling, who wrote the foreword for this book, won the Nobel Prize in economics for "having enhanced our understanding of conflict and cooperation through game-theory analysis." This came after he had taught a course in game theory and rational choice to advanced students andgovernment officials for 45 years. In this book, Robert Dodge provides in language for a broad audience, the concepts that Schelling taught. Armed with Schelling's understanding of game theory methods and his approaches to problems, the general reader can improve daily decision making. Mathematics often make game theory challenging but was not a major part of Schelling's course and is even less of a factor in this book. Along with a summary of the material Schelling presented, included are problems from the course and similar less challenging questions. While considerable analysisis done with the basic game theory tool - the two-by-two matrix - much of the book is descriptive and rational decision-making is explained with stories. Chapter supplements are added to illuminate points presented by Schelling, including writings by Paul Krugman, Thomas Friedman, Steven Levitt, andothers.


My last year at Harvard I had a Kennedy School student who took my course in Conflict, Cooperation, and Strategy, and did exceptionally well. He was a midcareer student, Robert Dodge, a high school teacher at a private school in Singapore. He decided to write a book suitable for high school students and, hopefully, a general public, based on my course. He went home thoroughly capable of presenting it to high schoolers. Over the years he put together this reader-friendly exposition of what I used to teach. Bob wanted it to be a textbook for high school students; I want it to be an exciting set of ideas for the general public. He got sidetracked into writing a professional biography of me (The Strategist: The Life and Times of Thomas Schelling, 2006) but returned to his original project.

This is not the book I would have written, but then I probably would never have written it. Bob has done it, and while there are things I might have included that are not here, there are things I would never have thought of that are here. I’m happy to endorse this compendium of a course (always in flux) that I taught for both graduates and undergraduates at Harvard for thirty years and at the University of Maryland for fifteen.

Some readers may know that in 2005 I received a Nobel Prize for “having enhanced our understanding of conflict and cooperation through game-theory analysis” and will wonder whether the subject of this book is “game theory.” The answer is both yes and no. There are two definitions of game theory, a “soft” one and “hard” one. The soft one depicts game theory as the study of situations in which two or more entities—persons, organizations, governments, businesses, teams, couples—might rationally reach decisions in situations in which the outcome for both parties depends on the decisions both make. Nobody can choose what to do without considering what the other will choose to do. This means anticipating what the other anticipates what oneself will do, or what the other anticipates oneself to anticipate, and so forth.

The hard definition, as presented in my dictionary, is “the study of mathematical models of conflict and cooperation between rational-decision makers.” You won’t find any mathematics, beyond simple arithmetic, in this book. We might say that this book is in the spirit of game theory, whether or not it is game theory.

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