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Game Theory TV—A Commentary by Ian Ayres ’86

The following commentary was published on Newyorktimes.com on May 24, 2010.

Game Theory TV
By Ian Ayres ’86

William Spaniel, an enterprising graduate student at the University of Rochester, has created a useful set of twenty-six short YouTube clips on game theory. I particularly like this explanation of forward induction and burning money:

http://www.youtube.com/watch?v=A-qfCBxdhIA&feature=player_embedded  

William also uses game-theoretic thinking to solve practical problems like how to catch a baseball during MLB batting practice. Or listen in on his analysis of how to find cheap gas using game theory:

My friends and I were driving back from Las Vegas to San Diego. About half way through the trip, we needed gas. We weren’t worried about suddenly running out, but we definitely couldn’t make it to two towns ahead of us–we absolutely had to get gas in the town we were about to pass through. There were five exits to the freeway in this city. The goal was to get gas for as cheap as possible. The problem was that we knew virtually nothing about what the price of gas should be in this town, and we weren’t keen on going around in circles until we found the best one around.

Then, I realized that you had covered a similar problem about a year ago. Instead of cheap gas, the problem was to find true love.

The solution to maximize your probability of success was to reject the first few suitors and pick the first of the remainder who is better than those you had gone out with previously. I suggested we try a similar strategy with the gas stations, as it has the same property. We breezed by the first two (which were selling for almost $3.50 each) before stopping at one with a much more reasonable price of $2.95. As it turned out, $2.95 was the best station available.

The game-theorist in me wants to ask under what conditions is this an equilibrium strategy? But I love that William sees a connection between two widely divergent contexts. To a game-theorist, both are questions of optimal search. If game theory can help you pick the right SAT answer without knowing the question, it’s not surprising that it might help you find cheap gas.