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Game Theory Brings Economics Principles to Life
Game Theory Brings Economics Principles to Life
Game Theory Brings Economics Principles to Life

March 16, 2015

We've all been there-sitting in traffic wondering, "Should I go this way or that way? Which route will get me home/to work faster?"

Matt Rousu, professor of economics at Susquehanna University, brings this and other everyday decisions into his classroom with the course "Game Theory," in which students attempt to mathematically determine the actions they should take to secure their own best outcomes.

"We take strategic choices that people make every day-which traffic route to take, whether or not to wait in a line-and we set it up as if it were a game," Rousu explained.

In one of Rousu's most recent classes, students were asked to decide between two different driving routes. Success within the game also depended upon how many students chose either route. They had three and a half minutes to make up their minds.

While much of the class quickly jumped from their seats upon the word go, sophomore accounting major Jeremy Witter, of Shippensburg, Pa., sat quietly at his desk, head down, calculating. Toward the end of the exercise, just before time ran out, he rose and chose a side-all very deliberate.

As it turns out, he chose the right side. But how?

"I figured out the equilibrium," Witter said, meaning he determined that, with 21 students in class, the successful route would need to have 13 or fewer "drivers," in order to be the fastest. "Once I found that equilibrium, I then knew that whichever 'route' was less crowded would give me the highest payoff. I waited till the final seconds to make sure not too many people would switch over in the final seconds, and then chose the group that had less people, guaranteeing myself the highest possible payoff."

Other games have included prisoner's dilemma, in which students must decide whether to share or hoard goods. The game builds upon the concept of Nash equilibrium, the idea that no player can do better by unilaterally changing their strategy.

"The class constantly challenges me to find hidden strategies and think through problems before making decisions, a tactic that I hope will allow me to make better decisions later in my professional career," Witter said. "Dr. Rousu's teaching methods push us to hone our strategic thinking skills and I personally find the challenge very fun!"

The class is made all the more interesting by the fact that students each throw $25 of their own money into a "pot," so to speak. Their ability to make the right strategic choices will result in either more or less money to their name at the end of the semester.

"The stakes are low but they still take it incredibly seriously. You learn fast if your money is on the line," Rousu said. "These are probably some of the coolest problems that they'll do. They're fun. They're not easy, but they're fun."

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