Game theory for Gen-Z to use in real-life

Game theory is the study of how people make decisions in situations where their actions affect others. It can help you understand and predict human behavior, and even improve your own choices. In this blog post, I will introduce some basic concepts of game theory and show you how they can be applied to real-life scenarios that you might encounter as a GenZ.

One of the most important concepts in game theory is the Nash equilibrium. This is a situation where no one can benefit by changing their strategy, assuming that others keep theirs fixed. For example, imagine that you and your friend are playing rock-paper-scissors. If you both choose randomly, then you have a Nash equilibrium, because neither of you can do better by switching to a different option. However, if you notice that your friend always chooses rock, then you can do better by choosing paper. This means that the random strategy is not a Nash equilibrium anymore.

Another key concept in game theory is the prisoner's dilemma. This is a scenario where two people have to decide whether to cooperate or defect, without knowing what the other person will do. If they both cooperate, they get a moderate reward. If they both defect, they get a low reward. If one cooperates and the other defects, the defector gets a high reward and the cooperator gets nothing. The dilemma is that even though cooperation is better for both of them, each person has an incentive to defect and hope that the other person cooperates.

How can you use game theory in real-life? Here are some examples:

- Negotiating: When you are negotiating with someone, you have to consider what they want and what they expect from you. You also have to think about how credible your threats and promises are. For instance, if you are buying a car from a dealer, you might threaten to walk away if they don't lower the price. But this only works if they believe that you have other options and that you are willing to leave. Otherwise, they might call your bluff and stick to their offer.

- Voting: When you are voting in an election, you have to weigh your preferences and your expectations. You might prefer candidate A over candidate B, but if you think that candidate B has a higher chance of winning, you might vote for them instead of wasting your vote on candidate A. This is called strategic voting, and it can affect the outcome of the election. However, if everyone votes strategically, then the result might not reflect the true preferences of the voters.

- Dating: When you are dating someone, you have to balance your attraction and your compatibility. You also have to deal with uncertainty and competition. For example, if you like someone but you are not sure if they like you back, you might try to signal your interest by flirting or complimenting them. But this also makes you vulnerable to rejection or manipulation. Alternatively, you might play hard to get and hope that they chase you. But this also risks losing their attention or interest.

Game theory can help you analyze these situations and make better decisions. However, game theory also has some limitations. It assumes that people are rational and self-interested, which is not always true in reality. It also simplifies complex situations into simple models, which might not capture all the relevant factors and dynamics. Therefore, game theory should be used as a tool, not as a rule.