Game Theory Tuesday: A Day in the Life of a Game Theorist: A Tribute to One Year of Game Theory Tuesdays

Today I take moment to celebrate the one-year anniversary of “Game Theory Tuesdays.” I can’t believe it’s been a year already and it has been quite the journey. The column started as a mission to show how our daily lives could be improved with math and strategy. I was warned people don’t like math so I set my expectations low. It was a pleasant surprise to see the column grow, and I never expected how popular it would become, reaching readers from Yahoo Finance to the Freakonomics blog.

But undoubtedly the most rewarding experience has been the personal connections I’ve made. It’s amazing to read daily comments and emails from people applying strategic thought. I thank all of you for providing feedback and I’ve shared some of my favorite comments at the end of the article. Your words have inspired me and taught me as well. My biggest lesson was learning how game theory is more than the equations, trees, and proofs that I carefully learned in classes. Game theory is a meditative tool for understanding and improving our daily lives.

Today I illustrate just what I mean by narrating how a hypothetical game theorist might go about a typical working day. Along the way I recount some of my favorite articles and give hints about future topics. Let’s begin in the early morning.

Alarm clocks and saving for retirement

Many of us wake up to an alarm clock. Underlying this simple action is a deeper strategy. Although there are no other players, there is a battle between the conflicting desires of being awake and sleeping more. How long you sleep can be interpreted as game between these two forces.

This formulation may sound strange but it has intellectual value because many of the games we play are against our conflicting desires, and as the old saying goes, many times we are our own worst enemy. Nobel Laureate Thomas Schelling studied self-management problems as a combination of economics and ego management and coined the term “egonomics.” Game theory principles can be used to think about a variety of self-improvement problems like losing weight or even planning for retirement.

The games boil down to taming unhealthy desires like eating or spending too much. One solution method is using commitment to restrict actions and encourage good behavior. The basic principle has even been used by basketball star Carmelo Anthony during off-season training (though I am fairly confident he never called it by the academic name “strategic commitment”). Commitment is a tool even you probably use: an alarm clock commits the sleeping self to a waking time determined by the alert body.

Hamburgers and drugs

Every time we enter the supermarket or a restaurant we are secretly engaged in a game with food companies. There’s a surplus between the cost of production and the price we’re willing to pay. How it gets split depends on how savvy we are as consumers against the scheming strategy of big food.

Food companies know they will be in a better negotiating position if customers can be made to commit to them. Think about the slogans. White Castle is “what you crave.” Taco Bell’s commercials for Melts ask you to “Get lost in melty cheese.” It’s harder to change once you have a taste for a particular brand.

Hence companies work hard to get customers to commit, even at the point of giving away free samples. What surprised me, and perhaps explains some of the irrational food decisions, is learning that food might actually be addictive, a strategy cunningly used by McDonald’s. This article shaped my own approach to taking free samples.

Traffic lights and Michael Phelps

Driving is a game of coordination. Each driver wishes to avoid accidents with others but verbal communication is difficult and decisions must be made quickly. Social conventions like driving on the right or left side of a road serve to reduce collisions. Traffic lights and stop signs also keep the mass of commuters on the same page.

These examples all fall under an important game theory concept called a “focal point.” A focal point is an outcome that naturally attracts everyone and nudges them to a particular course. Let me illustrate with an example.

Consider the following game: you and a friend are put in separate rooms and asked to name an Olympian from the 2008 games. If you name the same one, you both get $10; otherwise you both go home with nothing. I am willing to bet that most of us in America would win the game by naming Michael Phelps. Why Phelps? He has become a symbol for the Olympics, a focal point, by winning 8 gold medals and earning non-stop media coverage. Focal points are very useful because allow us to coordinate without having to communicate. See my article on how Stanford reduced bike accidents by creating a focal point.

Getting staffed on work projects and getting better airline food

How does your company staff its projects? Experience and skill play a role, but then there is strategy in choosing among employees of similar talent. Ultimately it is managers that make decisions and a staff that reacts to them. I suspect you have experienced anger at seeing a fellow coworker get the project you wanted. What can you do to improve your odds?

There is only so much you can do, but perhaps you can consider a strategy that’s useful in other areas. The answer has to do with why some airline passengers pretend to have special dietary needs, and why Stanford Economics professors are willing to give up authority in teaching their courses. The technique helped baseball legend Roger Clemens receive an astronomical $18.5 million salary in 2007. I describe it in full detail in my article about why less can be more.

Swirling wine and why games have solutions

You’re sipping a nice cup of wine while reading a book after a long day of work. You notice something peculiar as you swirl the glass—there always seems to be a point in the center that doesn’t move. The alcohol is hitting your brain so you become philosophical and wonder if you might be able to mix the wine in the glass in such a way that all points in the liquid space are moving.

It turns out there is no possible way, which can be proven using some interesting math. The point that does not move is called a “fixed point” and there are theorems that prove the existence of these special points. How does this relate to game theory? The same math can be used to show that many economic games have solutions, an idea from John Nash that sparked the beautiful field of game theory.

Here’s to one great year, and many more to come.

My favorite reader comments

I thank you all for sharing your positive thoughts via email, comments, and personal conversations. Here are some of my favorite portions from comments during the last year:

I stumbled upon your game theory blog and it is terrific!
Erik in Why Price Matching Guarantees Aren’t Helpful (link)

Great blog.
Paul in Why Price Matching Guarantees Aren’t Helpful (link)

Great blog! Just spent an hour reading through all the posts. Just in the discussions you’ve had, I see applications which I will experiment with.
Anand in How Do you Stop Free Riders? (link)

Just wanted to say that this is a beautiful and elegant analogy, and it deserves to be recognized as such. Nicely done.
Anonymous comment in Using Mechanism Design to Improve Your Finances (link)

I’m actually going to use that tip in the future — still more as a parenting tool, though. Forgot how I found your site, but it was a link that I bookmarked for a while before reading through it. I can’t wait to read your other posts. Thank you for sharing your ideas, Presh.
1kportfolio in Using Mechanism Design to Improve Your Finances (link)

I use a similar approach to my personal finances. I don’t think enough people in my age range take control and full advantage of their money matters. Anyway, as always - good post!
Angie in Using Mechanism Design to Improve Your Finances (link)

Very interesting look at retail. Thank you.
Dan in Why Clothing Sales Might be Going Away (link)

Addicted to your Game theory on Tuesdays. Nice post.
Vijaya in The Strategy of Surprise (link)

Great site keep up the good work.
Cylde in the Tragedy of the Commons and Overworking (link)

This is a fantastic post! Would I actually follow this method? Um, no. But I think it’s a hilariously over-logical analysis of a ritual most people would never consider examining with statistics.
Ben in Finding True Love Using Game Theory (link)

Nice article…Bargaining and its game theory analysis has been going on for centuries.
Mahesh in The Ultimatum Game and the Hollywood Strike (link)

This was fascinating. I’m glad I found your site, and I look forward to reading more game theory every Tuesday.
Monica in The Ultimatum Game and the Hollywood Strike (link)

Anyways, great site…Will be looking forward to Tuesdays.
Michael in The Ultimatum Game and the Hollywood Strike (link)

Thank you for a great overview and real strategy ideas for how to split bills.
Sean in How to Divide Restaurant Bills Fairly When Eating with Large Groups (link)

Ha, interesting. To those poking fun that the author should be enjoying his dinner rather than thinking this, know that many a classic problem or even new problems have been solved this way making large impacts on life.
DK in How to Divide Restaurant Bills Fairly When Eating with Large Groups (link)

I have really enjoyed reading through all of these posts.
September in How to Divide Restaurant Bills Fairly When Eating with Large Groups (link)

Your blog is awesome. I love your fresh insight and the obvious intelligence of your readers.
Joon in Dealing with the Principal Agent Problem at the Auto Mechanic (link)

This is a very nice article…Keep up the good work.
Susan in The Bar Scene from A Beautiful Mind and Buying Used Products (link)

Presh, I have recently started following your blog. I love game theory tuesdays!
Pankaj in Hotelling’s Game, or Why Gas Stations Have Competitors Nearby (link)

Great explanation. Your graphics with the lines really made things clear quickly!
Mike in Hotelling’s Game, or Why Gas Stations Have Competitors Nearby (link)

I have just discovered you web page and I want to [congratulate] you for it… It’s just great!
Sidryane in Hotelling’s Game, or Why Gas Stations Have Competitors Nearby (link)

Interesting article.
Kalid in Focal Points, or How We Naturally Organize (link)

Thank you for writing this … and I got a kick out of some of the comments
Nok in Focal Points, or How We Naturally Organize (link)

Great analysis of Michael Jordan specifically, and a useful post overall…
Ben in Manage Your Brand like Michael Jordan and Avoid Games of MAD (link)

I love your posts, this is one of my favorite blogs. Please keep up the great thought provoking posts, we your readers love this stuff!
JB in The Hat Puzzle, a Technical Interview Question (link)

As I said these posts are exceptional. I really enjoy them!
Dimitris in The Hat Puzzle, a Technical Interview Question (link)

Thanks for the discussion, Presh. This is basically my area of expertise so it is fun to see a post on the topic. Especially when it is clear and lucid.
Paul in Three Low-tech Ways to Protect Your Email Privacy (link)

Presh, you have a real talent for making difficult ideas so transparent that people will wonder why there was any fuss to begin with! Very useful explanatory post.
Michael in Three Low-tech Ways to Protect Your Email Privacy (link)

Hi Presh. Thanks for the post. The beginning of the post is great.
Alex in Three Low-tech Ways to Protect Your Email Privacy (link)

Darn you, Presh. You make infinite series seem so conventional. Aside from that, I absolutely adore the third solution.
Erik in The Dice Brain Teaser (link)

This was a great article. I totally see its applications.
Mike in How Game Theory Solved a Religious Mystery (link)

Burning Bridges - what an excellent post. Thank you for writing this.
Michael on Why You Might Want to Burn Bridges (link)

Fun article! Enjoyed the read.
Ravi in Voting Power in Israeli Judge Selection (link)

An awesome read! Thanks!
Ibrahim in Voting Power in Israeli Judge Selection (link)

Your selling strategy works very well and is the strategy that many people use all the time. I have used it before as well, but I have never really consciously sat down and thought about it to break it down piece by piece. You bring up some great points and insights about why we sell in this way and how we can improve it.
Jun in Why Patience Pays in Negotiations (link)

Great post, and excellent site Presh.
Rafa in Why Patience Pays in Negotiations (link)

Presh - great advice.
Milena in 10 Tips for Traveling Safely with Valuables (link)

Hi Presh, another great article with useful tips!
Naree in 10 Tips for Traveling Safely with Valuables (link)

Presh, your analysis here was brilliant. It is amazing to see how economic models can be applied to everyday life.
Keith in Heart Disease and Used Cars (on Brazen Careerist)

I thoroughly enjoyed reading your article. I had thought about the game theory while watching the movie for the first time, but never really thought about it this in depth. Thank you for writing such an interesting piece.
Adam in Game Theory and The Dark Knight (link)