Thursday, September 15, 2011

Computer Simulations Based On Game Theory

The Economist has an article in its Technology Quarterly focusing on analysts who simulate economic and political processes. They apparently create a virtual world in which the agents make decisions based on game theory. In some cases real political leaders have been simulated, based on expert estimates of the values that they hold, simplified for the game theoretic simulation. The military are using the approach for strategic planning as well as private corporations for economic planning.

Could software-based mediation spread from divorce settlements and utility pricing to resolving political and military disputes? Game theorists, who consider all these to be variations of the same kind of problem, have developed an intriguing conceptual model of war. The “principle of convergence”, as it is known, holds that armed conflict is, in essence, an information-gathering exercise. Belligerents fight to determine the military strength and political resolve of their opponents; when all sides have “converged” on accurate and identical assessments, a surrender or peace deal can be hammered out. Each belligerent has a strong motivation to hit the enemy hard to show that it values victory very highly. Such a model might be said to reflect poorly on human nature. But some game theorists believe that the model could be harnessed to make diplomatic negotiations a more viable substitute for armed conflict.
Today’s game-theory software is not yet sufficiently advanced to mediate between warring countries. But one day opponents on the brink of war might be tempted to use it to exchange information without having to kill and die for it. They could learn how a war would turn out, skip the fighting and strike a deal, Mr Bueno de Mesquita suggests. Over-optimistic, perhaps—but he does have rather an impressive track record when it comes to predicting the future.

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