Quantitative Reasoning 38 The Strategy of International Politics

1. Quantitative Reasoning 38The Strategy of International Politics Professor Lisa Martin Head TF Yev Kirpichevsky TF Dilyan Donchev

2. What you will get out of this course: • The basics of game theory. By the end, you will be able to write down and solve simple games. • An introduction to the study of international politics.

3. What is game theory? • The “theory of interdependent decision” (Thomas Schelling, an early game theorist and IR theorist) • Interdependent decision means that when one actor is making a decision, he has to take into account the likely reactions of others. They do this as well, and so on.

4. Example of interdependent decision: Coalition-building in Iraq • US had a desire to build a coalition to fight in Iraq • At the same time, fighting a war on terrorism and trying to prevent other conflicts (North Korea) from escalating • For each of these goals, necessary to take into account the reactions of others, and how they interact.

5. For example: US wanted to use Turkish air bases. Turkey concerned about how an Iraqi war would affect the Kurds in Iraq. Would they gain power, demand a Kurdistan? So US had to make commitments about Kurds in order to gain Turkish support. But US also wanted Kurdish support. Necessary to calculate how both Turkey and Kurds would react to any steps US took. Likewise, the other players calculating about US and others’ responses.

6. Uses of game theory • Useful for breaking out of potentially unmanageable complexity of situations like the one just described • Many applications developed in the study of military strategy; will also look at other areas of international politics • Applications to other areas of decision: economics, personal relations, management

7. When is game theory an appropriate tool? • Actors are goal-oriented • Number of actors small enough that they have to take the reactions of others into account in order to achieve their own goals. • Not easily applicable to many large-number situations, like markets, where the actions of a single individual have no impact.

8. What math skills are needed and learned? • Need algebra • Will learn probability theory • Set theory • Functions • Will not use calculus

9. Flat tire game Story: A group of students were on a weekend camping trip. They were late returning, and missed a midterm. They told the professor that they could not get back on time because they had a flat tire. She said she would give them an extension if they all gave the same answer (without consultation) to one question: “Which tire?”

10. Flat tire game • On an index card, write down one of the following four choices: Passenger front, Passenger rear, Driver front, or Driver rear • No talking! • TFs will tally the results; would you get the extension?

11. Flat tire game • Why did you choose the tire you did? • What factors influence choices? • What factors might allow students to coordinate successfully? • This is an example of a coordination or “focal point” game

12. Flat tire game – normal form

13. Flat tire game – extensive form • See drawing on board • Pure coordination games like this have certain characteristics. Payoffs are dependent on others’ choices; but there is no conflict of interest

14. Generic types of games • Pure coordination • Zero-sum: the opposite of pure coordination, where interests are in direct conflict, like divide-the-dollar • Enforcement problems: structure of the game leads to a suboptimal outcome, so enforcement is needed to make everyone better off. Common examples are commons problems. • Note: in this class, will focus on self-enforcing equilibria

15. Games we will study • Most games combine elements of these 3 simple games; will have some conflict of interest, some benefit from coordination, some enforcement problems. For example, consider explicit or tacit bargaining situations. • Will first study the basics of how to illustrate and solve games • Then study simple types of games • Then think about how to put them together

16. Claim a pile of dimes • Two players, A and B • I will put one dime on the table • Player A can say Stop or Pass • If Stop, then A gets the dime and the game ends • If Pass, I put another dime on the table and it’s B’s turn to say Stop or Pass • Game will end when there is one dollar on the table (players get maximum of 5 turns each)

17. Claim a pile of dimes • Results from playing this with 5 different pairs • Why did players do what they did? • Did players use rollback? • Did players learn from earlier rounds of the game? • Why didn’t everyone achieve the rollback equilibrium?

18. Bargaining game • Two players, A and B • A offers a split of a dollar (whole dimes only) • If B accepts, both get paid and the game ends • If B rejects, B gets to make an offer, but now the amount to be split is only 80 cents • If A accepts, both get paid and the game is over. • If A rejects, game is over and neither get anything

19. Bargaining game • Repeat with second-round total falling to 70, 60, 50, and 40 cents • Tally results • Why did players behave as they did? • How did the falling payoffs matter? • What would the rollback equilibrium be?