Game Theory and the Shutdown

HT to the Stirling Behavioral Science Blog for sharing this excellent application of game theory (and some behavioral economics) to the strategy of the government shutdown on the blog of the Harvard Business Review. The article doesn’t provide a mathematical model, but that’s precisely the point. Even without the formality of equations or a game matrix, game theory can provide us with useful tools for thinking about the decision makers involved in the shutdown. Or, as Justin Fox describes it,

I don’t get the sense that anyone has figured how to build this realization into a reliable predictive model — no game theorist is going to be able to tell you with great confidence how the budget standoff will play out. But the very exercise of looking at the current showdown as a game in which the players have limited knowledge but are able to learn illuminates a lot. [emphasis mine]

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