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Thoughts on Game Theory: Part 2

by Steve Zolotow |  Published: Jul 03, 2019


I ended part one of this series on Game Theory by presenting a problem suggested by the economist Richard Thaler. This is the problem: A group of people is offered a meaningful prize for the most accurate answer. Every member of the group is told to select a number from 0 to 100 that accurately predicts two-thirds of the average number selected by the group. Think about what number you would choose and why you would choose it. Does the belief that everyone in the group is rational affect your choice? Like many game theoretic situations and questions there is a theoretically correct answer, but there is also an exploitative answer. In many real-world situations, certainly in most poker situations, the exploitative answer will lead to much better results than the answer that game theory says is correct. The game theorist attacks the problem by thinking along the following lines. ...

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