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Game theory – playing around or practical for law departments?

Game theory is the study of strategy and how people make decisions when in conflict with one another. Thomas Schelling and Robert Aumann won the Nobel prize in economics last year for their efforts to give game theory practical and theoretical depth, respectively. (See my posts of Aug. 14, 2005 questioning the relevance of this economics concept to law departments and Dec. 19, 2005 noting game theory as a major business concept.)

Game theory presumes rationale decision-making by adversaries, but adds the extra fillip that neither can decide what to do without taking into account the actions of the other (Economist, Oct. 15, 2005 at 82). Game theory applies to a company sued repeatedly by the same law firm or a band of plaintiff’s firms. It illuminates the relationship between a law department and a law firm it frequently uses. Game theory has also contributed to the design of auctions, a pure form of strategies in a competitive situation. (See my post of Feb. 1, 2006 on law department auctions.)

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One response to “Game theory – playing around or practical for law departments?”

  1. Randolph says:

    The problem with game theory is that it’s based on assumptions that are unrealistic for parties that interact with each other. It assumes that each party’s preferences/objectives & options/opportunities (or the probabilities of them) are fixed, known and given throughout an interaction — whereas real-life parties use emotion, persuasion & rational debate to influence each others’ objectives & perceived opportunities.
    Due to its unrealistic assumptions (also used in economics) game theory finds no role for emotion or rational debate. Each party just optimizes its own preferences given what the others are doing — the famous Nash equilibrium. Fine for pure market situations, where parties don’t communicate. Very misleading for politics, war personal interactions — & legal practice.
    Check out drama theory (see the Dilemmas Galore website at for an approach that adds the missing element to game theory. It shows how parties use emotion & rational argument to define the game they’re going to play before playing it. From the Dilemmas Galore website, anyone actually can download free software & get help using it.
    NATO is moving into using drama theory for peace/stabilization operations. DoD is considering it.