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Game Theory for Software Developers at Boulder JUG

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.

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Matthew McCullough

October 13, 2011
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Transcript

  1. Game Theory for Software Developers by Matthew McCullough, Ambient Ideas,

    LLC
  2. Matthew McCullough @matthewmccull

  3. None
  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

  18. None
  19. Signaling

  20. Stotting

  21. None
  22. Bid Low for the 1st Month

  23. None
  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

  34. None
  35. The Red Button

  36. None
  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

  44. None
  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
  49. None
  50. Aligning the other player's desires with ours

  51. None
  52. credible incredible vs

  53. Big sale, 80% off for a limited time only!**

  54. None
  55. $20 per resume

  56. None
  57. None
  58. $1000 if hired

  59. None
  60. None
  61. One shot?

  62. Iterative?

  63. None
  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
  70. None
  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
  75. None
  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

  83. None
  84. Anonymously

  85. None
  86. Offer: 1 to 10

  87. No Way Back

  88. None
  89. None
  90. Strategically removing options

  91. Prisoner's Dilemma

  92. None
  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

  104. None
  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
  117. None
  118. Chicken  Best way to play is to throw out

    the steering wheel  But the other player must visibly take notice of that action
  119. None
  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

  131. None
  132. None
  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

  140. None
  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?
  172. None
  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