For someone who is not an expert in politics, Bruce Bueno de Mesquita of New York University makes remarkably accurate predictions of political events. He managed to predict the departure of Hosni Mubarak and Pereverz Musharraf from their posts with an accuracy of several months. He accurately named Ayatollah Khomeini's successor as leader of Iran 5 years before his death. When asked what the secret is, he replies that he does not know the answer - the game knows him. A game here means a mathematical method that was originally created for the formation and analysis of strategies for various games, namely, game theory. In economics, it is used most often. Although it was originally designed to build and analyze strategies in games used for entertainment.
Game theory is a numerical apparatus that allows you to calculate the scenario, or, more precisely, the probability of various scenarios of the behavior of a system or "game" controlled by various factors. These factors, in turn, are determined by a certain number of "players".
Game theory and economic behavior are very strongly and organically intertwined. This is natural. This determinesrange of problems that game theory solves in economics. It helps to calculate the sequence of events based on the fact that the participants will pursue their interests. Goals, motivation and the degree of influence of various players are input parameters of practical problems that game theory solves.
In the economy, the players are manufacturers, trading companies, banks and other organizations of various kinds. Based on these parameters, the computer model evaluates the likelihood of different behavior scenarios for each player, calculates their ability to influence the decisions of other players, and thus calculates the most expected sequence of events.
Game theory in economics is a great predictive tool. This method proved to be especially effective in the field of auction modeling. Bidding rates are quantified, and the end result can often be fairly accurately predicted. Consulting agencies effectively use computer programs based on game theory to make auction transactions with maximum benefit for the client. For example, a tactic devised by Professor Milgrom for Time Warner and Comcast to bid on broadcast frequencies proved to be a triumph, saving the firms nearly $1.2 million.
Game theory, which in economics allows efficient use of finances, in politics can resolve protracted conflicts and deadlocked negotiations. Recently, the idea was put forward to use a computer inas an independent negotiator in a situation where the process has stalled. Such programs, being an independent agent, can move the process forward without disturbing the balance of interests of different parties. Similar programs are being actively developed and tested in the area of divorce proceedings.
Thus, game theory, which received the main impetus for development in the economy, can be applied in various areas of human activity. It is too early to say that these programs will be used to resolve military conflicts, but in the future it is quite realistic.
