Most people think of game theory as a way to analyze competition between businesses or countries. And while that's certainly one applications of game theory, it's not the only one. Game theory can also be used to study cooperation between different entities. Some scholars argue that game theory is better suited for studying cooperation than competition. So how does game theory work, and how can it be applied to sustainability challenges? Let's take a closer look.
In game theory, there are two types of games: cooperative and non-cooperative. In a cooperative game, players are best off if they cooperate with each other because they can achieve a better outcome than they would by working independently. In a non-cooperative game, players are best off if they don't cooperate with each other because they can achieve a better outcome by working independently.
One of the most famous examples of a cooperative game is the Prisoner's Dilemma. In this scenario, two prisoners are each offered the same deal: if they both confess to the crime, they will each serve two years in jail; if only one confesses, that prisoner will serve three years in jail while the other will go free; and if neither confesses, they will each serve one year in jail. The obvious solution would be for both prisoners to keep their mouths shut and cooperate with each other by not confessing but, in reality, that's often not what happens because prisoners are worried about being betrayed by the other person.
The key insight from game theory is that cooperation is only possible when there is trust between the parties involved. Trust is essential for cooperation because it allows parties to overcome the fear of being betrayed. When it comes to sustainability challenges, trust is often in short supply because different parties have different goals and incentives. For example, companies are typically more interested in making profits than protecting the environment, while environmental organizations are typically more interested in protecting the environment than making profits. As a result, it can be difficult for these parties to find common ground and cooperate with each other on sustainability issues.
Game theory is a powerful tool that can be used to analyze a wide range of situations, from business competition to political conflict. It can also be applied to sustainability challenges—but only when there is trust between the parties involved. What does it take to create trust among people in competing corporations and industries?