Game Theory in the Real World

Title: Behavioral Game Theory: Experiments in Strategic Interaction
Author: Colin F. Camerer
Genre: Academic/game theory
Readability: Scientific

Game theory is the formalised study of strategic interaction, and was first started back in the 1960s – one of the better known theorists within the field is John Nash, who is portrayed in the movie A Beautiful Mind. Game theory is an extremely interesting field, and has lots and lots of applications in everything from sports to biology to how you deal with your wife and kids, and how men and women behave towards each other. Unfortunately, since its invention, it has mostly been studied from an dry analytical perspective, and most books about game theory reflects this, being filled with equations and similar tools well suited to scare away anything but hardened economists and mathematicians. I only became interested in it because I first encountered it in Richard Dawkins’ fascinating book The Selfish Gene, where it was explained in a way that you could easily understand (see my review of The Selfish Gene elsewhere in this blog).

Luckily, scientists such as Colin Camerer has begun to take a new perspective on game theory. Instead of studying complex formalised games, they got out of the laboratory and started looking at how people actually behave when they deal with each other. This approach has led to a range of interesting insights about human behavior, such as social preferences, reciprocal altruism and strategic impotence. In Behavioral Game Theory, Camerer summarises a lot of the research in the area and outlines some further research perspectives. The most fascinating thing about the different experiments is what they reveal about human nature and the way we make decisions.

The book is academic in nature and requires some familiarity with game theory. If you are new to the field, you will probably be better off starting with a standard economic textbook, or, better yet, by reading the relevant chapters in Richard Dawkins’ book (mentioned above).