Game Theory for Software Developers at Boulder JUG

Game Theory, a segment of economics, can effectively be applied to software development for achieving better financial and decision making outcomes.

Transcript

1. Game Theory for Software Developers by Matthew McCullough, Ambient Ideas, LLC
2. Matthew McCullough @matthewmccull
4. The Big Picture
5. 4 Basic Elements
   Players
   Strategies
   Payoffs
   Common knowledge
6. Games
7. Business
8. Economics
9. Game theory is...
10. Strategic interactive decision making
11. Strategy dependent on the choices of others
12. Economics as science
13. “Good fortune is what happens when opportunity meets with planning” --Thomas Alva Edison
14. The Company
15. MacroCode
16. Consultancy
17. Underbid
19. Signaling
20. Stotting
22. Bid Low for the 1st Month
24. Build the New Business
25. Decision Tree
26. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
27. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
28. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
29. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
30. Bounded Rationality
31. Beauty Contest
32. Beauty Contest Rules
    Guess between 1 and 100
    Winner has the number at 70% of the average guess
33. University Employees
35. The Red Button
37. The $2 Button: Rules
    Gather 100 friends
    Everyone starts with a $100 prize
    Everyone gets a button
    If you push, it deletes $2 from everyone else's prize
    Everyone gets one button push
38. appx. 30% push
39. Worried about retribution
40. The $2 Button: New Rules
    Gather 100 random players
    Everyone starts with a $100 prize
    Everyone gets a button
    If you push, it deletes $2 from everyone else's prize
    Everyone gets one button push
    If you push, you cut your losses in half
41. appx. 70% push
42. Framed as defense
43. Bilateral Anterior Insular Cortex
45. 
    What if everyone had a meet and greet in advance?
    What if everyone knew each other?
    What if everyone was a family member? Red Button Coalitions?
46. Hiring
47. Incentives
48. Motivating others to do what we want them to with rewards
50. Aligning the other player's desires with ours
52. credible incredible vs
53. Big sale, 80% off for a limited time only!**
55. $20 per resume
58. $1000 if hired
61. One shot?
62. Iterative?
64. Rules
65. Don't push changes after Thursday
66. Don't disable your anti-virus software
67. Must have 100% test coverage
68. Unintended Consequences
    Some quantity of rules are what make a game playable
    Don't capriciously create new rules at the last moment
69. Scoring for the other Team
    1994: Barbados vs. Grenada
    Must win by 2 goals to advance
    B2:G1
    Goals count double in overtime
    Grenada began defending Barbados' goal
71. Team Colors
72. Penny Altruism
73. Ultimatum Game
74. Ultimatum Game Rules
    The purse is provided by a bank
    Players are not allowed to communicate
    There is only one decision to be made
    There are 100 strategies
76. Alice Bob Bank
77. Ultimatum Offer 100 Accept 100,0 Decline 0,0 Offer 99 Offer 98 Offer 30 Offer 10 Accept Decline Accept Decline Accept Decline Accept Decline 99,1 0,0 0,0 10,90 0,0 30,70 0,0 98,2 Alice Bob
78. Fair
79. 70/30 split
80. Observed
81. Commission
82. Between ages of 3 & 5
84. Anonymously
86. Offer: 1 to 10
87. No Way Back
90. Strategically removing options
91. Prisoner's Dilemma
93. Alice Defects Alice Stays Silent Bob Defects -4,-4 0,-5 Bob Stays Silent -5,0 -1,-1
94. Dev Tests Dev Shirks QA Tests -1,-1 -1,0 QA Shirks 0,-1 -2,-2
95. Testing
96. Centipede Game
97. 100% Test Coverage
98. Monty Hall
99. Bayes Formula
100. Birthday Attack
     With 26 people in the room, what is the chance that someone has January 1st as their birthday?
101. Birthday Attack
     With 26 people in the room, what is the chance that any two share a birthday?
102. Retailer Selection
103. Red/Black Cards
105. Red/Black Negotiations
     23 Red Cards with instructor
     23 Cards with students
     What kind of deal do you hold out for?
106. Alice loses three cards
107. Red/Black Negotiations
     20 Red Cards with instructor
     23 Cards with students
     What kind of deal do you hold out for?
108. Acquisition
109. No!
110. Threat?
111. Commitment
112. Doomsday Device
113. Poison Pill
114. Brinksmanship
115. Chicken
116. What is it?
     Playing at high stakes
     By not offering any small response, scaring the other player of the consequences of the big response
118. Chicken
     Best way to play is to throw out the steering wheel
     But the other player must visibly take notice of that action
120. Partnerships
121. Incremental value
122. Shapley Value
123. Factory
124. Factory Sizes
     Small: $60,000
     Medium: $90,000
     Large: $130,000
125. Advertising
126. Warranty
127. Signaling
128. Quality
129. Lifetime
130. Google Adwords
133. Price
134. Thomas Schelling
135. Schelling points
136. Schelling Points
     Grand Central Station in New York
     99¢ on the App Store
     $39.95 for FPS games
     DVD releases on Tuesday
     Comic books releases on Wednesday
     Theater film releases on Friday
137. How do they occur?
     Publicity
     Competition
     Frequency
     Tradition
138. Google
139. Etsy
141. Schelling Number
142. Schelling Number
     Write down an two-digit odd number in which both the digits are different
143. Vendor Trouble
144. Late
145. Fire them?
146. We need 10 of 12
147. Lemons
148. George Akerlof
149. Balancing Act Peaches Lemons Peaches Peaches Pay
150. Balancing Act Peaches Lemons Peaches Peaches Pay
151. Balancing Act Peaches Lemons Peaches Peaches Pay
152. Balancing Act Peaches Lemons Peaches Pay
153. Balancing Act Peaches Lemons Peaches Pay Lemons
154. Balancing Act Pay Peaches Lemons Peaches Lemons
155. Balancing Act Peaches Lemons Peaches Pay Lemons
156. Grim Trigger
157. This is going to be our last project...
158. Alice Betrays Alice Co-operates Bob Betrays 5,5 0,5 Bob Co-operates 5,0 1,1
159. make it sequential
160. Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate
161. Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Betray
162. Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Betray
163. Co-operate Co-operate Co-operate Co-operate Co-operate Betray
164. Co-operate Co-operate Co-operate Co-operate Betray
165. Co-operate Co-operate Co-operate Betray
166. Co-operate Co-operate Betray
167. Co-operate Betray
168. Betray
169. Simultaneous Shoe Bidding
170. What would you bid for this pair of shoes?
171. What would you bid if you only had a 50% chance of getting the other shoe?
173. XKCD 601: Game Theory
174. Game Theory for Software Developers by Matthew McCullough, Ambient Ideas, LLC
175. References: Software
     Gambit
     http://www.gambit-project.org/doc/index.html
     http://www.gambit-project.org/doc/samples.html
     Game Theory Explorer
     http://gametheoryexplorer.appspot.com/builder/
176. References: Research
     The Teaching Company: Game Theory Video Course
     http://www.thegreatcourses.com/tgc/courses/Course_Detail.aspx?cid=1426
     Professor Scott P. Stevens, Ph.D. The Pennsylvania State University James Madison University
     Bookmarks
     http://www.delicious.com/matthew.mccullough/gametheory
     Range Voting
     http://rangevoting.org/TBlecture.html
     Market for Lemons
     http://en.wikipedia.org/wiki/Market_for_lemons
     http://nobelprize.org/nobel_prizes/economics/laureates/2001/akerlof-article.html
     http://www.springerlink.com/content/h3h8530156276515/
     http://hydrogen.its.ucdavis.edu/eec/education/EEC-classes/eeclimate/class- readings/akerlof-the%20market%20for%20lemons.pdf
177. References: Blogs
     Mind Your Decisions
     http://mindyourdecisions.com/blog/
     Game Theory Strategies
     http://www.gametheorystrategies.com/
     Twitter, Barry Hughes
     https://twitter.com/#!/gamethry
178. References: Books
     Theory of Games and Economic Behavior
     http://en.wikipedia.org/wiki/Theory_of_Games_and_Economic_Behavior
     http://press.princeton.edu/titles/7802.html
     http://www.amazon.com/Economic-Behavior-Commemorative-Princeton-Editions/ dp/0691130612/ref=sr_1_1?ie=UTF8&qid=1310015156&sr=8-1
     Rock, Paper, Scissors: Game Theory in Everyday Life
     http://www.amazon.com/Rock-Paper-Scissors-Theory-Everyday/dp/0465009387/ ref=sr_1_2?ie=UTF8&qid=1310490759&sr=8-2
     The Art of Strategy: A Game Theorist's Guide to Success in Business and Life
     http://www.amazon.com/Art-Strategy-Theorists-Success-Business/dp/0393337170/ ref=pd_bxgy_b_text_c
     Co-Opetition : A Revolution Mindset That Combines Competition and Cooperation : The Game Theory Strategy That's Changing the Game of Business
     http://www.amazon.com/Co-Opetition-Revolution-Combines-Competition- Cooperation/dp/0385479506/ref=pd_sim_b_1
179. References: People
     John von Neumann
     http://en.wikipedia.org/wiki/John_von_neumann
     Thomas Schelling
     http://en.wikipedia.org/wiki/Thomas_Schelling
     John Forbes Nash
     http://en.wikipedia.org/wiki/John_Forbes_Nash
     John Harsanyi
     http://en.wikipedia.org/wiki/John_Harsanyi
180. Photo Credits
     100 Dollar Bill Roll
     http://www.flickr.com/photos/85473033@N00/3367543296
     Pennies
     http://flic.kr/p/6ucLDE
     http://flic.kr/p/6u8BEa
     Earth
     http://flic.kr/p/9DTDXi
     Dice
     http://flic.kr/p/9g1aZc
     Cards
     http://flic.kr/p/4UwZc6
     http://flic.kr/p/6FKnGu
     http://flic.kr/p/4V67rx
     Happy Hour
     http://www.flickr.com/photos/beleaveme/3276175127/
     Prison
     http://flic.kr/p/38wBWq
181. Other Ideas
     Bounded Rationality
     2-3 event horizon
     Typing
     Pooling or separating equilibria
     Prisoner's Dilemma with an Arbiter
     Tragedy of the Commons
     Air pollution
     Mass transit tickets
     Overfishing
     Volunteer's Dilemma
     Witnessing a crime