In this paper, we use game theory to understand decisions to cooperate or to compete in the delivery of public health services. Health care is a quasi-public good that is often associated with altruistic behavior, yet it operates in an increasingly competitive environment. With mounting health care regulation and changes in privatization, altruistic arguments give way to more competitive rationales for market decisions. Profit and not-for-profit institutions must address widespread health care needs while balancing the needs of more lucrative markets against the needs of lesser ones. Recognizing the roles of cooperation and competition as motivators in the delivery of health care to the public is imperative. We explore two game theory models (Nash's Equilibrium and the Prisoner's Dilemma) and their related concepts of simultaneous interdependence and rationality to examine decision-making. Four hypothetical public health case studies are presented. We conclude that understanding game theory and the factors influencing decisionmaking allows potential competitors to make more efficient decisions, including decisions to cooperate or compete. As public health agencies move toward more collaborative models of service delivery, such understanding may help enhance efficient and effective service delivery.
Am J Health Educ. 2012;43(3):175-183. Submitted September 28, 2009. Accepted February 25, 2012.
Game theory is a mathematical approach to understanding decision-making and human behavior under various constraints and assumptions. This applied mathematical analysis explains options and outcomes for various social, economic and political behaviors. (1) The field of conflict resolution uses game theory as one of many important theoretical underpinnings, because understanding the reasons for cooperation and competition is fundamental to the discipline. (2) This paper examines the utility of using game theory to enhance understanding of cooperative and competitive choices made in various aspects of public health.
Most game theory models make several important assumptions. The two most salient may relate to interdependence and rationality. From the early theorizing of John von Neumann and Oskar Morgenstern (3) to the emergence of Nash's Equilibrium, (4) one of the major assumptions of game theory has been interdependence. Interdependence means that the players are affected by the joint sum of their combined decisions. Although each player is free to make an individual choice, the outcomes for all players are contingent on the sum of all the choices made by the group of players. Rationality implies that individual players will make choices that maximize their outcomes given their expectation of what other players might choose. As a result, when players make the choice to cooperate or compete, they attempt to anticipate the choices of others to make the most rational decision for themselves.
To understand how interdependence and rationality work, we must examine the choices available to the players and the outcomes each player receives based on these choices. Many game theory applications assume that players have a dichotomous choice between cooperation and competition (also called non-cooperation or defection in many applications). The combination of these choices (to compete or to cooperate) results in a series of payoffs to the players. Thus, although each player is free to make an individual choice, the payoff is a function of the joint set of choices made by all the players. For example, if both choose to cooperate, each one receives a given payoff. If both choose to compete, each one receives a given payoff. If one player chooses to cooperate and the other player chooses to compete, each player receives a given payoff. The value of the payoffs to the players can be similar or dissimilar. When the payoffs for all players for the same joint set of choices are the same, this is a symmetric payoff game. …