112 Philosophy and Progress

Philosophy and Progress: Vols. LIX-LX, January-June, July-December, 2016 behavior. The purpose of this paper is to clarify the following
ISSN 1607-2278 (Print), DOI : http://dx.doi.org/10.3329/pp.v59i1-2.36683
issues: firstly, to provide very brief overview of game and
game theory; secondly, to discuss background and impact of
game theory; thirdly, to analyze the prisoner’s dilemma game
and finally, to present applications of game theory with special
attention to philosophy.
Key Words: game, game theory, strategy, prisoner’s dilemma,
philosophy.
i. Game
AN OVERVIEW OF GAME THEORY AND The ‘game’ is the object of studying in game theory. The
SOME APPLICATIONS complete set of rules describes a game. A play is an instance of
the game. Most games played for fun, entertainment and
Bellal Ahmed Bhuiyan* leisure. When someone over reacts, we sometimes say ‘it’s just
a game’. Checkers, chess, football, judo, and squash and
thousands of other formalized contests are examples of games
Introduction in which there are two players or teams. Most of these games
Game theory is an autonomous discipline that is used in have only one winner after played (Geckil, 2010). But there are
applied mathematics, social sciences, most considerably in many other situations that can be formulated as games. A game
economics, as well as in biology, engineering, political science, follows as:
international relations, computer science and philosophy. Game A game is an abstract, which is defined as a formal
theory is the mathematical study of strategy and conflict, in description of a strategic situation. Any strategic
which an agent’s success in making choices depends on the interaction involves two or more decision- makers
choice of others. It was initially developed in economics to (players), each with two or more ways of acting
understand a large collection of economic behaviors, including (strategies), such that the outcome depends on the
behaviors of firms, markets and consumers. Game theory has strategy choices of all the players. Each player has well-
been used to attempt to develop theories of ethical or normative defined preferences among all the possible outcomes,
behavior as well. In economics and philosophy, scholars have enabling corresponding utilities (payoffs) to be
applied game theory to help in the understanding of rational assigned. A game makes explicit the rules governing
                                                             players’ interactions, the players feasible strategies, and
*
 Lecturer, Department of Philosophy, University of Dhaka their preferences over outcomes (Bicchieri and Sillari,
Email: [email protected]  2005, P. 296).

                                                                                          
An Overview of Game Theory And Some Applications 113 114 Philosophy and Progress

All games have three essential elements- players, strategies, d) Normal and extensive form: The strategic form which is
payoffs. So, a game in normal form consists of: also called normal form is the basic type of game studied in
non-cooperative game theory. A game in strategic form lists
a) A (finite) number of players. P= {1,2,3….,n},
each player, and the outcomes that result from each possible
{P1,……,Pn}
combination of choices. The extensive form, which is also
b) A Strategy set Si assigned to each player: {S1 ,…,Sn} known as a game tree, is more detailed than the strategic form
c) A utility/payoff function- set players gains: {U1,…,Un} of a game. It is a complete description of how the game is
played over time.
Different Categories of Game
e) Zero-sum and non-zero-sum games: Zero- sum games
Games can be distinguished according to various criteria: have the property that the sum of the payoffs to the players
a) According to number of players: Usually there should be equals zero. For example, chess, poker, and most sports game
more than one player. Maximum number of players is finite. A like basketball are zero-sum game. Real- world games are
player may be expounded as a nation, or a team comprising rarely zero-sum game. It is also called constant-sun games. In
many people, companies, associates etc. Game categorized as a non-zero-sum games, all players could win or loss together.
one- person, two persons, or n-person (n>2) game. Most of the games in our real life and the business world are
non-zero-sum game. For example, price wars between firms
b) According to rationality of players: A key supposition in are non-zero-sum games. In non-zero-sum game players have
many variants of game theory is that the players are rational. A common and conflicting interests (Geckil, 2010).
rational player is one who always chooses an action which
gives the outcome he most prefers, given what he expects his ii) Game Theory
competitors to do. There can be distinguished two extreme Game theory is the logical analysis of situations of conflict and
ways. The first one is called ‘intelligent’ player who is acting cooperation. Game theory could be formally defined as a
rationally. The other extreme is the player who chooses random theory of rational decision in conflict situations. Model of such
actions. situations, as they are conceived in game theory, involve
c) According to cooperation: Games can be categorized into a) a set of decision makers, called players;
cooperative and non- cooperative. A game in which players are
allowed to cooperate with each other on a joint strategy is b) a set of strategies available to each player, courses of
called a ‘cooperative game’. For example, a cooperative game action which he or she may choose to follow;
is a bargaining game between parties in a transaction over the c) a set of outcomes, the strategies chosen by each player
value of a target company. For non- cooperative is basic determine the outcome of the game;
assumption that individual players can not cooperate. In this
d) a set of payoffs accorded to each player in each of the
game is associated with the analysis of strategic choices.
possible outcomes. (Rapoport, 1974, p.1)

                                                                                          
An Overview of Game Theory And Some Applications 115 116 Philosophy and Progress

So, Game theory is the study of how players should rationally not only mathematical apparatus, but also an important tool in
play games. Each player would like to the game to end in an economics, political science, law, psychology, philosophy and
outcome which gives him as large a payoff as possible. He has other disciplines.
some control over the outcome, since his choice of strategy
iii) Background and impact of Game Theory
will influence it.
Game theory has been widely recognized as an important tool
The field known as ‘game theory’ was introduced in the last in different fields. The developments of Game theory is largely
century by mathematicians and economists as a tool to analyze broadened. The initial discussion of game theory occurred in a
both economic competition and political conflicts. Two letter written by James Waldegrave in 1713. In this letter,
distinguished game theorists Robert Aumann and Oliver Hart, Waldegrave provides a mixed strategy solution to a two-person
explain the attraction in the following way: version of the card game le Her. James Madison made what we
Game Theory may be viewed as a sort of umbrella or now recognize as a game theoretic analysis of the ways states
‘unified field’ theory for the rational side of social can be expected to behave under different system of taxation.
science, where ‘social’ is interpreted broadly, to include The earliest example of a formal game-theoretic analysis is the
human as well as non- human players (computers, study of a dupopoly by Antoine Cournot in 1838. His
animals, plants) … It does not use different, ad hoc publication Researches into the Mathematical Principles of the
constructs … It develops methodologies that apply in Theory of Wealth presents a solution that is a restricted version
principle to all interactive situations (Aumann and Hart, of the Nash equilibrium (Crider, 2012, p. 4). A formal theory
1992, P. 3) of games was suggested by the mathematician Emile Borel in
1921, which was furthered by the mathematician John Von
The subject of Game theory are situations, where the result for
Neumann in a “theory of parlor games” in 1928.
a player does not only depend on his own decisions, but also on
the behavior of the other players. Game theory is the theory of John Von Neumann and Oskar Morgenstern published the
independent and interdependent decision making in Theory of Games and Economic Behavior in 1944. It
organizations where the outcome depends on the decisions of introduced the economic and mathematical basis for the field
two or more autonomous players, one of which may be nature we now call ‘Game theory’. This book contained much of the
itself, and where no single decision maker has full control over basic terminology and problem setup that is still in use recent
the outcomes (Kelly, 2003). times. Von Neumann and Morgenstern established the field
that economic and social questions can often be described as
The concepts of game theory provide a common language to
mathematical models of suitable games of strategy. This
formulate, structure, analyze and eventually understand
gigantic work provides the method for finding mutually
different strategic scenarios. Game theory is a scientific
consistent solutions for two-person zero-sum games (Geckil
discipline that investigates conflict situations, the interaction
and Anderson, 2010).
between the agents and their decisions (Hotz, 2006). To
perform the analysis of critical situations, Game theory uses

                                                                                          
An Overview of Game Theory And Some Applications 117 118 Philosophy and Progress

Game theory became closely associated with the Rand having laid the foundations of mechanism design theory” with
Corporation after the second world war. The Rand standing for game theory structure and its design. Alvin E. Roth and Lloyd
R and D) corporation was a private company spun off from the S. Shapley were awarded the Nobel Prize in Economics “for
US Air Force at the end of the war and it was specially the theory of stable allocations and the practice of market
concerned with the prospects of inter-continental nuclear design” in 2012. And, in 2014 the Nobel Prize went to game
warfare. Game theory was obviously relevant to this task and theorist Jean Triole. Eleven game theorists have got the Nobel
as a result the organization championed its development by Prize in Economics and John Maynard Smith was awarded the
hiring as consultants Von Neumann and other central figures in Crafoord Prize for his application of game theory (Aumann,
the development of Game theory, like John Nash, Duncan Luce 1991).
and Howard Raiffa (Heap and Varoufakies, 1995).
iv) Game Example - Analysis of “The Prisoner’s Dilemma”
In 1950, game theory developed dramatically, when John Nash Classic and probably the most discussed example of the use of
developed game theory tools and concepts for general non- Game Theory is the Prisoner’s Dilemma. The ‘Prisoner’s
cooperative theory and cooperative bargaining theory. He Dilemma’ is an example of a two-person non-zero-sum game,
introduced what is now called the “Nash equilibrium” of a in which some outcomes are preferred by both players to other
strategic game in 1951. Game theory was broadened outcomes. It is a subset of game theory and is simplified to
theoretically and applied to problems of war’ political science give each of two parties two decisions- resulting in 2*2= 4
and philosophy in the 1950’s and 1960’s. British philosopher possible outcomes.
R.B. Braithwaite in his book Theory of Games as a Tool for the
Moral Philosopher was applied to philosophy in 1955. In this In 1950 Melvin Dresher and Merril Flood at the RAND
book, Braithwaite provides how games can be used to arrive at Corporation considered Game 1.1 to illustrate that a non-zero-
moral and ethical decisions (Geckil and Anderson, 2010). sum game could have an equilibrium outcome which is unique,
but fails to be Pareto optimal.
As a specialized field game theory was established by great
mathematicians and economists, the last quarter of the Colin
twentieth century and early 2000s. Game theory acknowledged A B
special attention in 1994 with the awarding of the Nobel prize
in Economic science to: John Harsanyi, John Nash and Rose
Reinhard Selten. Game theorists Thomas Schelling and Robert A (0,0) (-2,1)
Aumann was awarded Nobel prize in 2005. Schelling worked
on dynamic models, early examples of evolutionary game B (1,-2) (-1,-1)
theory. Aumann for having enhanced our understanding of Game 1.1: The original Prisoner’s Dilemma.
conflict and cooperation through game-theory analysis. In
2007, Roger Myerson, together with Leonid Hurwicz and Eric A is “ don’t confess”; B is “Confess”.
Maskin, was awarded the Nobel prize in Economics “for

                                                                                          
An Overview of Game Theory And Some Applications 119 120 Philosophy and Progress

Later, when presenting this example at a seminar at Stanford P= Punishment for Mutual Defection = Payoff for
University, Albert W. Tucker told a story to go with the game Defection against Defection (D/D).
and formalized (Straffin, 1993, 73). The story of Prisoner’s The general form of Prisoner’s Dilemma conditions: T>R>U>S
Dilemma is as follows: and R>(S+T)/2
Two prisoners accused of the same crime are kept in The situation can be described by a payoff matrix:
separate cells. Only a confession by one or both can
lead to conviction. If neither confesses, they can be C D
convicted of a lesser offense, incurring a penalty of one
month in prison. If both plead guilty of the major crime, C (R,R) (S,T)
both receive a reduced sentence, five years. If one (0,0) (-2,1)
confesses and the other does not, the first goes free (for
having turned State’s evidence), while the other D (T,S) (P,P)
receives the full sentence, ten years in prison. Under the (1,-2) (-1,-1)
circumstances is it rational to admit guilt or to deny it?”
(Rapoport, 1974, P. 17).
In this situation both suspects offered these options: Figure1.2: Prisoner’s Dilemma. Here, C:
Cooperative & D: Defect
a) If both suspects not confess, they will be arrested for 1
month. V) Some Applications of Game Theory

b) If both suspects confess, they will be arrested for 5 years. Game theory is not just theory, it’s also applied in many areas.
The use of game theory has expanded and applied to
c) If one suspect confesses and the other did not, then one economics, business, biology, computer science, political
who confessed will get free (0). The other one who did science, psychology and philosophy. Game theory can describe
not confess will be arrested for 10 years. a number of specific phenomena: interpersonal relations,
The constants involved in this situation, analysis need to be competition, war and political affairs. From a historical aspects
introduced here: Therefore, let game theory can be identified in the works of ancient
philosophers. It is applied to develop theories of ethical or
R= Reward for mutual cooperation= Payoff for normative behavior. Economists and philosophers have applied
Cooperation against cooperation (Payoff for C/C). game theory to understand rational behavior. There are some
S= Sucker’s payoff = Payoff for Cooperation against applications of game theory in the below:
Defection (C/D)
T= Temptation to Defect = Payoff for Defection against
Cooperation (D/C)

                                                                                          
An Overview of Game Theory And Some Applications 121 122 Philosophy and Progr

Economics and Business Game Theory in Politics:

Game theory is an important tactics applied in mathematical Game theory is widely used in political affairs, which is
economics and business for modeling the patterns of behavior focused on the areas of international politics, war strategy, war
of interacting agents. According to P.A. Samuelson and W. D. bargaining, social choice theory, Strategic voting, political
Nordhaus: economy etc. Game theory is an effective tool in the hands of
diplomats and politicians to analysis any situation of conflict
Economic life contains many situations with strategic
between individuals, companies, states, political parties.
interaction among firms, households, governments or
Rationality of actors and the choice of strategies are one of the
others. Game theory analyzes the way that two or more
basic assumptions of game theory. Game theory seems to be
parties, who interact in an arena such as a market,
useful tool for research on terrorism because it captures the
choose actions or strategies that jointly affect all
interaction between attacked subject and terrorist organization,
participants (Samuelson, 2010, P. 207).
when the steps are interdependent and therefore cannot be
Economists use ‘Game Theory’ as a tool to analyze economic analyzed separately (Sandler and Arce M, 2003).
competition, economic phenomena such as bargaining,
By using Prisoner’s dilemma, we will focus situation where
mechanism design, auctions, voting theory; experimental
governments choose between active and reactive counter
economics, political economy, behavioral economics etc.
terrorism policies.
Game theory is applied for determining different strategies in
Let,
the business world. It offers valuable tools for solving strategy
problems. Many business strategies are short or long-term There are two countries- Bangladesh and India. Both countries
plans to achieve sustainable profitability. A business can often face common threat of terrorist attacks, and both must agree on
successfully position in the market with right strategy and a whether or not to jointly apply active counter- terrorism policy.
business will suffer in the long run with wrong strategy. Bangladesh
Strategic behavior occurs regularly among executives, manager
active reactive
and investors in business world. They must decide to enter into
new markets, launch new products, invest now or lose the
opportunity to invest and make pricing and purchasing active (4, 4) (-2, 6)
decisions. Game-theoretic models are very potential tools for
analyzing firm decisions. Game theory models forces each India
player to consider the actions of others when picking their reactive (6, -2) (0, 0)
strategy, in which one player may respond to the moves of his
competitor. It provides significant benefit to a decision maker
(Geckil and Anderson, 2010).

                                                                                          
An Overview of Game Theory And Some Applications 123 124 Philosophy and Progress

We assumed that active policy for individual countries gains Game Theory and Philosophy
benefits of 6 and costs of 8 for country that applied active Game theory and Philosophy are connected in many ways.
policy. If the India is applying active policy and the Game theory has been used as a tool in philosophical
Bangladesh will be the state that will only get benefits discussions. Philosophers have promisingly attracted in game
associated with it, then Bangladesh will have the advantages of theory as it offers a way of interpreting the conception of
the 6. India gets -2 (6-8). Cost of 8 shall be deducted from the Philosophers. There are different areas of Philosophy that
benefits of 6. Otherwise, if the India is a free-rider, the benefits interact in a fruitful way with game theory.
are reversed.
Kant’s Categorical Imperative
If both countries are active policy, then everyone gets the
benefit of -4 (8- 2×6). German Philosopher Immanuel Kant’s moral philosophy is
rooted in his formulation of the categorical imperative. It refers
The result is prisoner’s dilemma game, in which no country to the ‘supreme principle of morality’ from which all our moral
wants to apply active counter-terrorism policy. duties are derived. Kant’s first formulation of the categorical
Evolution of cooperation Imperative, the Formula of Universal Law: “Act only
according to that maxim whereby you can at the same time will
Game theory is applied to analyze many seemingly anomalous
that it should become a universal law” (Kant, 1785, p. 46).
natural phenomena in biology. The evolution of cooperation is
a fundamental problem in biology because unselfish, altruistic The categorical imperative can apply in game theory. In terms
actions apparently contradict Darwinian selection. Game of game theory, this statement can be restated as follows:
theory offers to an evolutionary context, has become an “Choose only a strategy which, if you could will it to be chosen
invaluable tool to address the evolution of cooperation. The by all the players, would yield a better outcome from your
most noted mechanisms of cooperation are direct and indirect point of view than any other” (Nitti, 2014, p. 36). This
reciprocity and spatial structure (Heiko Hotz, 2006). statement, then becomes a solution to the Prisoner’s Dilemma.
That is, according to Kant’s categorical imperative, only a
The concept of cooperation and altruism- as it is analyzed by
cooperative choice can result. This is because the personal
evolutionary biology- is close to the notion of ‘Tit for Tat’
choice of defecting, if ‘made universal’, is in contradiction to
which is an effective strategy first introduced by Anatol Paport.
one’s personal interest.
He tries to show that self- interested persons will cooperate to
promote their general interest. Robert Axelrod (1984) tries to Epistemology
demonstrate the evolutionary feasibility of reciprocal altruism Epistemology, the study of knowledge, which inquires about
and cooperation with each other in a Tit for Tat’ prisoner’s the nature, source, status and extent of knowledge. Game
dilemma game. theory challenged philosophers to think in terms of interactive
epistemology. It covers players have common knowledge of
the structure of the game and their mutual rationality.

                                                                                          
An Overview of Game Theory And Some Applications 125 126 Philosophy and Progress

According to Cristina Bicchieri: “The epistemic approach to uncertainty for an agent is the way other agents will behave
game theory provides a formal analysis of strategic reasoning, (Cristina, 2007). After analyzing some of the application of the
making explicit player’s knowledge or beliefs about the game theory in philosophy we assumed that, game theory has
structure of the game and the strategies, knowledge and beliefs been the object of philosophical inquiry.
of other players” (2007, p. 22).
Concluding Remarks:
Rational Behavior and Decision Theory Game theory is the formal study of conflict and cooperation
Game theory is a useful and potential tool for the between intelligent rational decision-makers. It has been a
understanding of human affairs. Game theory has been powerful analytical tool to help us understand the phenomena
expounded as a part of a general theory of Rational Behavior. that can be observed when decision makers interact. Game
Rationality is a normative concept, which indicates to what we theoretic models have become increasingly sophisticated and in
should do in order to attain a given end or objective. When we consequence, much more powerful and useful. It has been
are thinking of behavior involving a choice of the best means successfully applied to a wide variety of disciplines including
available for achieving a given end that is ‘rational behavior’ economics, sociology, psychology, philosophy. Game theory
(Harsanyi, 1980). Rational behavior models are widely used in has helped sharpen our intuitions, allowing a ‘rational
game theory. According to Von Neumann and Morgenstern: reconstructions’ of different ideas, norms, values among agents
‘We wish to find the mathematically complete principles which (players) for significant philosophical expositions. At the end
define ‘rational behavior’ for the participants in a social of discussion, we would like to quote from British prominent
economy, and to derive from them the general characteristics writer Charles Lamb’s (1775-1834) famous work Essays of
of that behavior’ (1944, p. 31). Game theory as a theory of Elia: ‘Man is a gaming animal. He must always be trying to get
rationality advices what agents (players) should do in specific the better in something or other’.
interactive situations, given their preferences.
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An Overview of Game Theory And Some Applications 127 128 Philosophy and Progress

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