One of the most basic limitations of game theory is that each playermust know the cost functions of the other players. As established inSection 9.5.1, it is even quite difficult to determine anappropriate cost function for a single decision maker. It is evenmore difficult to determine costs and motivations of other players.In most practical settings this information is not available. Onepossibility is to model uncertainty associated with knowledge of thecost function of another player. Bayesian analysis could be used toreason about the cost based on observations of actions chosen by theplayer. Issues of assigning priors once again arise. One of thegreatest difficulties in allowing uncertainties in the cost functionsis that a kind of ``infinite reflection'' occurs [392]. For example, if I am playing agame, does the other player know my cost function? I may be uncertainabout this. Furthermore, does the other player know that I do notcompletely know its cost function? This kind of second-guessing canoccur indefinitely, leading to a nightmare of nested reasoning andassignments of prior distributions.9.10
The existence of saddle points or Nash equilibria was assured by usingrandomized strategies. Mathematically, this appears to be a cleansolution to a frustrating problem; however, it also represents asubstantial change to the model. Many games are played just once.For the expected-case results to converge, the game must be played aninfinite number of times. If a game is played once, or only a fewtimes, then the players are very likely to experience regret, eventhough the theory based on expected-case analysis indicates thatregret is eliminated.
Another issue is that intelligent human players may fundamentallyalter their strategies after playing a game several times. It is verydifficult for humans to simulate a randomized strategy (assuming theyeven want to, which is unlikely). There are even internationaltournaments in which the players repeatedly engage in classic gamessuch as Rock-Paper-Scissors or the Prisoner's Dilemma.For an interesting discussion of a tournament in which people designedprograms that repeatedly compete on the Prisoner's Dilemma, see[917]. It was observed that even some cooperation often occursafter many iterations, which secures greater rewards for both players,even though they cannot communicate. A famous strategy arose in thiscontext called Tit-for-Tat (written by Anatol Rapoport),which in each stage repeated the action chosen by the other player inthe last stage. The approach is simple yet surprisingly successful.
In the case of nonzero-sum games, it is particularly dishearteningthat multiple Nash equilibria may exist. Suppose there is only oneadmissible equilibrium among several Nash equilibria. Does it reallyseem plausible that an adversary would think very carefully about thevarious Nash equilibria and pick the admissible one? Perhaps someplayers are conservative and even play security strategies, whichcompletely destroys the assumptions of minimizing regret. If thereare multiple admissible Nash equilibria, it appears that regret isunavoidable unless there is some collaboration between players. Thisresult is unfortunate if such collaboration is impossible.
Steven M LaValle2020-08-14FAQs
Game theory cannot account for the fact that in some situations we may fall into a Nash equilibrium, and other times not, depending on the social context and who the players are. In addition, game theory often struggles to factor in human elements such as loyalty, honesty, or empathy.
What are game theories concerned with? ›
In other words, game theory is concerned with specifying actions for all players, ensuring that for each player, his/her chosen actions are optimal, given the actions of other players, implying that optimality is relative. As a result, it is generally difficult to define the best outcome from the view of all players.
What is the argument against game theory? ›
Every action, good or bad, can be rationalized in the name of self-interest. A constant difficulty with game theory modeling is defining, limiting, isolating or accounting for every set of factors and variables that influence strategy and outcome. There's always an X-factor that simply cannot be accounted for.
What are the major limitations of game theory? ›
Limitations of game theory
Although these assumptions may be close to reality, they may not accurately reflect the real world. For example, game theory often assumes that people are rational, selfish, and competitive—but in reality, people are often irrational or have no interest in competing with others.
What is the common dilemma game theory? ›
Commons dilemma. The commons dilemma is a specific class of social dilemma in which people's short-term selfish interests are at odds with long-term group interests and the common good.
What is decision problem in game theory? ›
A classical problem in decision theory is what attitudes to risk and uncertainty are rationally permissible. A classical problem in game theory is whether rationality requires one to free-ride on others in interactive decision-problems such as the “prisoner's dilemma”.
What are five assumptions of game theory? ›
2) The players act reasonably. 3) Every player strives to maximize gains and minimize losses. 4) Each player has finite number of possible courses of action. 5) The choices are assumed to be made simultaneously, so that no player knows his opponent's choice until he has decided his own course of action.
What is game theory in simple terms? ›
Game theory studies interactive decision-making, where the outcome for each participant or "player" depends on the actions of all. If you are a player in such a game, when choosing your course of action or "strategy" you must take into account the choices of others.
What is an example of a game theory? ›
In game theory, the equilibrium point is the saddle point between the players' payoff. An excellent example of this mathematical model in the real world is when employees negotiate a union action such as a strike. Classic theory examples include the prisoner's dilemma and the volunteer's dilemma.
What is the paradox in game theory? ›
Parrondo's paradox, a paradox in game theory, has been described as: A combination of losing strategies becomes a winning strategy. It is named after its creator, Juan Parrondo, who discovered the paradox in 1996.
Game theory is a type of role-playing that can be used to develop an understanding of one's own motivations, and those of others. More importantly, it can help fine-tune a person's skills at negotiating for mutually beneficial results. Such skills are useful whether in an adversarial, business, or personal setting.
What is the disadvantage in using game theory for decision-making? ›
Disadvantages: The limitations of game theory include the assumption of rational behavior and the complexity of modeling real-world situations accurately.
What is game theory concerned with? ›
Game theory is concerned with: Answer - Predicting the results of bets placed on games like roulette. - The choice of an optimal strategy in conflict situations. - Utility maximization by firms in perfectly competitive markets. - The way in which a player can win every game.
What is the game theory problem? ›
It is argued that the assumptions made by game theorists are often violated when applied to real-world situations. Game theorists usually assume players act rationally, but in practice, human rationality and/or behavior often deviates from the model of rationality as used in game theory.
Who is taking over game theory? ›
The remaining channels will be passed down to the editors and creative heads that the Theorist channels previously had. Lee Collins will be taking over Film Theory, Amy Roberts will be hosting Style Theory, Santiago Massa will be hosting culinary adventures of Food Theory, and Tom Robison will be the writer and host of ...
What is the problem of game based learning? ›
Game Based Learning - Challenges
Games take time to learn and design properly. Wasted efforts will be the greatest administrative fear. Involve materials that range from the inexpensive to the costly. Design efforts are often funded via grants which have to be managed.
What are the criticism of game theory in economics? ›
Critics argue that game theory is too abstract, assumes that all players are rational and self-interested, and is too focused on competition. However, despite these criticisms, game theory remains an important tool for understanding and analyzing a wide range of economic and social phenomena.
What is the hold up problem in game theory? ›
The hold-up problem is a situation where two parties may be able to work most efficiently by cooperating but refrain from doing so because of concerns that they may give the other party increased bargaining power and thus reduce their own profits.
