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What Game Are You Playing?

NEWSLETTER ARTICLE

The 2005 Nobel Prize in Economics was awarded to Robert Aumann and Thomas Schelling for their work in game theory. While the subject may seem like the usual esoteric stuff of Nobel Prizes, it actually has implications for organization and operation of process plants. Game theory looks at how groups or individuals make decisions1 . At its simplest, consider two prisoners who are being interrogated separately. They can either confess or not confess, with four possible outcomes as shown in the table below. The outcome of one’s decision depends upon what decision the other makes. Confessing is the least risky, but not confessing is best if you knew that the other person also wouldn’t confess. This has been extrapolated to a whole class of business and economic problems, resulting in numerous Nobel Prizes, including this year’s.

Replace the prisoners in the example with your process units. Instead of being interrogated, the plant has experienced some sort of upset and operational decisions must be made (e.g., Do I cut steam usage or keep operating and hope others cut the necessary steam?) Do those who make the decisions know what the other units are going to do? With certainty? Do you understand why placing those units which interact or compete for common resources fare better when control (i.e., decisions) of those units is from a common point?

 

Prisoner 1

Confess

Don’t Confess

 

Prisoner 2

Confess

10 years each

Prisoner 1:0 years

Prisoner 2: 20 years

Don’t Confess

Prisoner 1: 20 years

Prisoner 2: 0 years

1 year each

Maybe that Nobel Prize stuff is more practical than it seems on the surface.


1 McCain, Roger. Strategy and Conflict – An Introductory Sketch of Game Theory. Retrieved 12 October, 2005. http://william-king.www.drexel.edu/top/eco/game/game.html

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