Game Theory Applications
NBER has recently produced a working paper titled Game Theory and Major League Sports asserting “Professionals Do Not Play Minimax: Evidence from Major League Baseball and the National Football League”.
By analyzing over 3 million baseball pitches & football over 125 thousand plays, they work to find out if the assumption of minimax holds true and if not, try be able to find any hidden strategies which are currently being used. According to the research:
…Authors Kenneth Kovash and Steven Levitt find that: “Pitchers appear to throw too many fastballs; football teams pass less than they should.” They also find that the selection of pitches or plays is too predictable. The researchers conclude that “correcting these decisionmaking errors could be worth as many as two additional victories a year to a Major League Baseball franchise and more than a half win per season for a professional football team.”…
Minimax is an assumed strategy that rational players utilize when locked into a zero sum game. It basically states that each player will attempt to minimize their loss. For this research, baseball and football are zero sum games in that gaining yards or points, necessitates a loss on the other side (loss of an out or field position).
This might be seen as banal, even if interesting, but continued research using game theory will be able to provide insights into fundamental human behavior. This additional understanding has truly long range applications especially and hopefully in the dismal field which is economics.
Indeed one of the primary and justified criticisms of current economic policies as it relates to fat taxes and other things, is that it fails to deal with real world behavior.
For instance, from a straight economics standpoint, driving 30 miles to save $100 is a nobrainer regardless of the price of the item itself. However in research, we find people would drive 30 miles to save that $100 on an item whose normal cost is $300, but almost no one is willing to travel the extra distance if the original price tag was $30,000.
This is the kind of real world actions that bug economists to no end. Looking at the idea with only logic, it seems that driving 30 miles for $100 is a good idea based upon the $100 dollars, not the item being purchased. However, intuitively we know that saving 1/3 of an item’s cost versus 1/3 of 1% has different values to the individual.
Why? Well, the answer to this puzzle will differ greatly among individual economists, but the good news is the research itself. The more science we can use to help strengthen our basic understanding of humans can lead us to policies more thoughtful and more likely to end in the intended results than past attempt.
At this point, I’d just be happy if the understanding we had was used to understand things such as “tax it more and they’ll use it less” isn’t a strategy to much of anything, but all things in time.
October 19, 2009
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Posted by Michael S. Langston
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