Game Theory 101 (Scalia’s replacement edition)

Check out this excellent essay in the Harvard Business Review in which two academic economists, Avinash Dixit and David McAdams, use game theory to analyze the year-long political impasse over the U.S. Supreme Court. Game theory is a branch of mathematics and is used to model conflict situations from the perspective of the contestants involved in the conflict. Thus, in place of normative, legal, or ideological arguments, Professors Dixit and McAdams take a different approach. First, they model the impasse as a strategic game with players and payoffs. One player is President Obama. He wins if he is able to replace the late Justice Scalia with a liberal justice. To do this, however, he needs the cooperation of the other players in this game: the Republican senators who control the U.S. Senate. But they win only if they are able to replace Scalia with a conservative justice.

Next, Dixit and McAdams identify the three most likely outcomes of this contest:

  1. Republicans win: Donald Trump wins the presidency and the Republicans retain control over the Senate.
  2. Status quo: Hillary Clinton wins the presidency, while the Republicans retain control over the Senate.
  3. Democrats win: Hillary Clinton wins the presidency, and the Democrats win control over the Senate.

Lastly, Dixit and McAdams use a standard method game theorists call “backwards induction” to figure out what the most likely outcome of this game will be. At the same time, however, there is an unstated irony in their game-theoretic analysis of this political impasse. Traditional game theory presupposes perfect rationality among the players, but in any given real-world conflict scenario (like this judicial nomination game), the players act in less than rational ways. In this particular game, for example, Dixit and McAdams show how some Republicans are blinded by the “sunk cost” fallacy. They also explain why both players in this game are either over- or under-estimating the probabilities of each possible outcome.

Image result for applying game theory to the supreme court nomination hbr

Credit: Dixit & McAdams

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
This entry was posted in Bayesian Reasoning, Economics, Game Theory, Law, Politics. Bookmark the permalink.

1 Response to Game Theory 101 (Scalia’s replacement edition)

  1. CHC says:

    This sounds intriguing and I can’t wait (well, I can, until tomorrow when I have time to concentrate) to delve into the details. Thank you for sharing.

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