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Game Theoryfor Software Developers
by Matthew McCullough, Ambient Ideas, LLC
Matthew McCullough
@matthewmccull
The Big Picture
4 Basic Elements
Players
Strategies
Payoffs
Common knowledge
Games
Business
Economics
Game theory is...
Strategic interactive
decision making
Strategy dependent on the
choices of others
Economics as science
“Good fortune is what
happens when opportunity
meets with planning”
--Thomas Alva Edison
The Company
MacroCode
Consultancy
Underbid
Signaling
Stotting
Bid Low for the 1st Month
Build the
New Business
Decision Tree
C:1
Red
1/2
1:1
Raise
2:1
Meet
2 -2
Pass
1 -1
Fold
1 -1
Black
1/2
1:2
Raise
2:1
Meet
-2 2
Pass
1 -1
Fold
-1 1
C:1
Red
1/2
1:1
Raise
2:1
Meet
2 -2
Pass
1 -1
Fold
1 -1
Black
1/2
1:2
Raise
2:1
Meet
-2 2
Pass
1 -1
Fold
-1 1
C:1
Red
1/2
1:1
Raise
2:1
Meet
2 -2
Pass
1 -1
Fold
1 -1
Black
1/2
1:2
Raise
2:1
Meet
-2 2
Pass
1 -1
Fold
-1 1
C:1
Red
1/2
1:1
Raise
2:1
Meet
2 -2
Pass
1 -1
Fold
1 -1
Black
1/2
1:2
Raise
2:1
Meet
-2 2
Pass
1 -1
Fold
-1 1
Bounded Rationality
Beauty Contest
Beauty Contest Rules
Guess between 1 and 100
Winner has the number at 70% of
the average guess
University Employees
The Red Button
The $2 Button: Rules
Gather 100 friends
Everyone starts with a $100 prize
Everyone gets a button
If you push, it deletes $...
appx. 30% push
Worried about
retribution
The $2 Button: New Rules
Gather 100 random players
Everyone starts with a $100 prize
Everyone gets a button
If you push, i...
appx. 70% push
Framed as defense
Bilateral Anterior
Insular Cortex
What if everyone had a meet and
greet in advance?
What if everyone knew each other?
What if everyone was a family
member?
...
Hiring
Incentives
Motivating others to do what
we want them to with rewards
Aligning the other player's
desires with ours
credible
incredible
vs
Big sale, 80% off for a limited
time only!**
$20 per resume
$1000 if hired
One shot?
Iterative?
Rules
Don't push changes
after Thursday
Don't disable your
anti-virus software
Must have 100%
test coverage
Unintended Consequences
Some quantity of rules are what
make a game playable
Don't capriciously create new rules
at the la...
Scoring for the other Team
1994: Barbados vs. Grenada
Must win by 2 goals to advance
B2:G1
Goals count double in overtime
...
Team Colors
Penny Altruism
Ultimatum Game
Ultimatum Game Rules
The purse is provided by a bank
Players are not allowed to
communicate
There is only one decision to ...
Alice Bob
Bank
Ultimatum
Offer 100
Accept
100,0
Decline
0,0
Offer 99 Offer 98 Offer 30 Offer 10
Accept Decline Accept DeclineAccept Decli...
Fair
70/30 split
Observed
Commission
Between ages of 3 & 5
Anonymously
Offer: 1 to 10
No Way Back
Strategically
removing options
Prisoner's Dilemma
Alice Defects Alice Stays Silent
Bob Defects -4,-4 0,-5
Bob Stays Silent -5,0 -1,-1
Dev Tests Dev Shirks
QA Tests -1,-1 -1,0
QA Shirks 0,-1 -2,-2
Testing
Centipede Game
100% Test Coverage
Monty Hall
Bayes Formula
Birthday Attack
With 26 people in the room, what is
the chance that someone has
January 1st as their birthday?
Birthday Attack
With 26 people in the room, what is
the chance that any two share a
birthday?
Retailer
Selection
Red/Black Cards
Red/Black Negotiations
23 Red Cards with instructor
23 Cards with students
What kind of deal do you hold out
for?
Alice loses three cards
Red/Black Negotiations
20 Red Cards with instructor
23 Cards with students
What kind of deal do you hold out
for?
Acquisition
No!
Threat?
Commitment
Doomsday Device
Poison Pill
Brinksmanship
Chicken
What is it?
Playing at high stakes
By not offering any small response,
scaring the other player of the
consequences of the...
Chicken
Best way to play is to throw out the
steering wheel
But the other player must visibly
take notice of that action
Partnerships
Incremental value
Shapley Value
Factory
Factory Sizes
Small: $60,000
Medium: $90,000
Large: $130,000
Advertising
Warranty
Signaling
Quality
Lifetime
Google Adwords
Price
Thomas Schelling
Schelling points
Schelling Points
Grand Central Station in New York
99¢ on the App Store
$39.95 for FPS games
DVD releases on Tuesday
Comic...
How do they occur?
Publicity
Competition
Frequency
Tradition
Google
Etsy
Schelling Number
Schelling Number
Write down an two-digit odd
number in which both the digits are
different
Vendor Trouble
Late
Fire them?
We need 10 of 12
Lemons
George Akerlof
Balancing Act
PeachesLemons Peaches
Peaches
Pay
Balancing Act
PeachesLemons Peaches
Peaches
Pay
Balancing Act
Peaches
Lemons
Peaches
Peaches
Pay
Balancing Act
PeachesLemons Peaches
Pay
Balancing Act
PeachesLemons Peaches
Pay
Lemons
Balancing Act
Pay
Peaches
Lemons
Peaches
Lemons
Balancing Act
PeachesLemons Peaches
Pay
Lemons
Grim Trigger
This is going to be
our last project...
Alice
Betrays
Alice
Co-operates
Bob
Betrays 5,5 0,5
Bob
Co-operates 5,0 1,1
make it sequential
Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate
Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Betray
Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Betray
Co-operate Co-operate Co-operate Co-operate Co-operate Betray
Co-operate Co-operate Co-operate Co-operate Betray
Co-operate Co-operate Co-operate Betray
Co-operate Co-operate Betray
Co-operate Betray
Betray
Simultaneous Shoe Bidding
What would you bid
for this pair of shoes?
What would you bid
if you only had a
50% chance of
getting the other
shoe?
XKCD 601: Game Theory
Game Theoryfor Software Developers
by Matthew McCullough, Ambient Ideas, LLC
References: Software
Gambit
http://www.gambit-project.org/doc/index.html
http://www.gambit-project.org/doc/samples.html
Ga...
References: Research
The Teaching Company: Game Theory Video Course
http://www.thegreatcourses.com/tgc/courses/Course_Deta...
References: Blogs
Mind Your Decisions
http://mindyourdecisions.com/blog/
Game Theory Strategies
http://www.gametheorystrat...
References: Books
Theory of Games and Economic Behavior
http://en.wikipedia.org/wiki/Theory_of_Games_and_Economic_Behavior...
References: People
John von Neumann
http://en.wikipedia.org/wiki/John_von_neumann
Thomas Schelling
http://en.wikipedia.org...
Photo Credits
100 Dollar Bill Roll
http://www.flickr.com/photos/85473033@N00/3367543296
Pennies
http://flic.kr/p/6ucLDE
http...
Other Ideas
Bounded Rationality
2-3 event horizon
Typing
Pooling or separating equilibria
Prisoner's Dilemma with an Arbit...
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
Game Theory for Software Developers at the Boulder JUG
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Game Theory for Software Developers at the Boulder JUG

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Game Theory, a segment of economics, can effectively be applied to software development for achieving better financial and decision making outcomes.

Delivered on October 13, 2011

Publicado en: Tecnología

Game Theory for Software Developers at the Boulder JUG

  1. 1. Game Theoryfor Software Developers by Matthew McCullough, Ambient Ideas, LLC
  2. 2. Matthew McCullough @matthewmccull
  3. 3. The Big Picture
  4. 4. 4 Basic Elements Players Strategies Payoffs Common knowledge
  5. 5. Games
  6. 6. Business
  7. 7. Economics
  8. 8. Game theory is...
  9. 9. Strategic interactive decision making
  10. 10. Strategy dependent on the choices of others
  11. 11. Economics as science
  12. 12. “Good fortune is what happens when opportunity meets with planning” --Thomas Alva Edison
  13. 13. The Company
  14. 14. MacroCode
  15. 15. Consultancy
  16. 16. Underbid
  17. 17. Signaling
  18. 18. Stotting
  19. 19. Bid Low for the 1st Month
  20. 20. Build the New Business
  21. 21. Decision Tree
  22. 22. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
  23. 23. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
  24. 24. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
  25. 25. C:1 Red 1/2 1:1 Raise 2:1 Meet 2 -2 Pass 1 -1 Fold 1 -1 Black 1/2 1:2 Raise 2:1 Meet -2 2 Pass 1 -1 Fold -1 1
  26. 26. Bounded Rationality
  27. 27. Beauty Contest
  28. 28. Beauty Contest Rules Guess between 1 and 100 Winner has the number at 70% of the average guess
  29. 29. University Employees
  30. 30. The Red Button
  31. 31. The $2 Button: Rules Gather 100 friends Everyone starts with a $100 prize Everyone gets a button If you push, it deletes $2 from everyone else's prize Everyone gets one button push
  32. 32. appx. 30% push
  33. 33. Worried about retribution
  34. 34. The $2 Button: New Rules Gather 100 random players Everyone starts with a $100 prize Everyone gets a button If you push, it deletes $2 from everyone else's prize Everyone gets one button push If you push, you cut your losses in half
  35. 35. appx. 70% push
  36. 36. Framed as defense
  37. 37. Bilateral Anterior Insular Cortex
  38. 38. What if everyone had a meet and greet in advance? What if everyone knew each other? What if everyone was a family member? Red Button Coalitions?
  39. 39. Hiring
  40. 40. Incentives
  41. 41. Motivating others to do what we want them to with rewards
  42. 42. Aligning the other player's desires with ours
  43. 43. credible incredible vs
  44. 44. Big sale, 80% off for a limited time only!**
  45. 45. $20 per resume
  46. 46. $1000 if hired
  47. 47. One shot?
  48. 48. Iterative?
  49. 49. Rules
  50. 50. Don't push changes after Thursday
  51. 51. Don't disable your anti-virus software
  52. 52. Must have 100% test coverage
  53. 53. Unintended Consequences Some quantity of rules are what make a game playable Don't capriciously create new rules at the last moment
  54. 54. Scoring for the other Team 1994: Barbados vs. Grenada Must win by 2 goals to advance B2:G1 Goals count double in overtime Grenada began defending Barbados' goal
  55. 55. Team Colors
  56. 56. Penny Altruism
  57. 57. Ultimatum Game
  58. 58. Ultimatum Game Rules The purse is provided by a bank Players are not allowed to communicate There is only one decision to be made There are 100 strategies
  59. 59. Alice Bob Bank
  60. 60. Ultimatum Offer 100 Accept 100,0 Decline 0,0 Offer 99 Offer 98 Offer 30 Offer 10 Accept Decline Accept DeclineAccept DeclineAccept Decline 99,1 0,0 0,010,900,030,700,098,2 AliceBob
  61. 61. Fair
  62. 62. 70/30 split
  63. 63. Observed
  64. 64. Commission
  65. 65. Between ages of 3 & 5
  66. 66. Anonymously
  67. 67. Offer: 1 to 10
  68. 68. No Way Back
  69. 69. Strategically removing options
  70. 70. Prisoner's Dilemma
  71. 71. Alice Defects Alice Stays Silent Bob Defects -4,-4 0,-5 Bob Stays Silent -5,0 -1,-1
  72. 72. Dev Tests Dev Shirks QA Tests -1,-1 -1,0 QA Shirks 0,-1 -2,-2
  73. 73. Testing
  74. 74. Centipede Game
  75. 75. 100% Test Coverage
  76. 76. Monty Hall
  77. 77. Bayes Formula
  78. 78. Birthday Attack With 26 people in the room, what is the chance that someone has January 1st as their birthday?
  79. 79. Birthday Attack With 26 people in the room, what is the chance that any two share a birthday?
  80. 80. Retailer Selection
  81. 81. Red/Black Cards
  82. 82. Red/Black Negotiations 23 Red Cards with instructor 23 Cards with students What kind of deal do you hold out for?
  83. 83. Alice loses three cards
  84. 84. Red/Black Negotiations 20 Red Cards with instructor 23 Cards with students What kind of deal do you hold out for?
  85. 85. Acquisition
  86. 86. No!
  87. 87. Threat?
  88. 88. Commitment
  89. 89. Doomsday Device
  90. 90. Poison Pill
  91. 91. Brinksmanship
  92. 92. Chicken
  93. 93. What is it? Playing at high stakes By not offering any small response, scaring the other player of the consequences of the big response
  94. 94. Chicken Best way to play is to throw out the steering wheel But the other player must visibly take notice of that action
  95. 95. Partnerships
  96. 96. Incremental value
  97. 97. Shapley Value
  98. 98. Factory
  99. 99. Factory Sizes Small: $60,000 Medium: $90,000 Large: $130,000
  100. 100. Advertising
  101. 101. Warranty
  102. 102. Signaling
  103. 103. Quality
  104. 104. Lifetime
  105. 105. Google Adwords
  106. 106. Price
  107. 107. Thomas Schelling
  108. 108. Schelling points
  109. 109. Schelling Points Grand Central Station in New York 99¢ on the App Store $39.95 for FPS games DVD releases on Tuesday Comic books releases on Wednesday Theater film releases on Friday
  110. 110. How do they occur? Publicity Competition Frequency Tradition
  111. 111. Google
  112. 112. Etsy
  113. 113. Schelling Number
  114. 114. Schelling Number Write down an two-digit odd number in which both the digits are different
  115. 115. Vendor Trouble
  116. 116. Late
  117. 117. Fire them?
  118. 118. We need 10 of 12
  119. 119. Lemons
  120. 120. George Akerlof
  121. 121. Balancing Act PeachesLemons Peaches Peaches Pay
  122. 122. Balancing Act PeachesLemons Peaches Peaches Pay
  123. 123. Balancing Act Peaches Lemons Peaches Peaches Pay
  124. 124. Balancing Act PeachesLemons Peaches Pay
  125. 125. Balancing Act PeachesLemons Peaches Pay Lemons
  126. 126. Balancing Act Pay Peaches Lemons Peaches Lemons
  127. 127. Balancing Act PeachesLemons Peaches Pay Lemons
  128. 128. Grim Trigger
  129. 129. This is going to be our last project...
  130. 130. Alice Betrays Alice Co-operates Bob Betrays 5,5 0,5 Bob Co-operates 5,0 1,1
  131. 131. make it sequential
  132. 132. Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate
  133. 133. Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Betray
  134. 134. Co-operate Co-operate Co-operate Co-operate Co-operate Co-operate Betray
  135. 135. Co-operate Co-operate Co-operate Co-operate Co-operate Betray
  136. 136. Co-operate Co-operate Co-operate Co-operate Betray
  137. 137. Co-operate Co-operate Co-operate Betray
  138. 138. Co-operate Co-operate Betray
  139. 139. Co-operate Betray
  140. 140. Betray
  141. 141. Simultaneous Shoe Bidding
  142. 142. What would you bid for this pair of shoes?
  143. 143. What would you bid if you only had a 50% chance of getting the other shoe?
  144. 144. XKCD 601: Game Theory
  145. 145. Game Theoryfor Software Developers by Matthew McCullough, Ambient Ideas, LLC
  146. 146. References: Software Gambit http://www.gambit-project.org/doc/index.html http://www.gambit-project.org/doc/samples.html Game Theory Explorer http://gametheoryexplorer.appspot.com/builder/
  147. 147. References: Research The Teaching Company: Game Theory Video Course http://www.thegreatcourses.com/tgc/courses/Course_Detail.aspx?cid=1426 Professor Scott P. Stevens, Ph.D. The Pennsylvania State University James Madison University Bookmarks http://www.delicious.com/matthew.mccullough/gametheory Range Voting http://rangevoting.org/TBlecture.html Market for Lemons http://en.wikipedia.org/wiki/Market_for_lemons http://nobelprize.org/nobel_prizes/economics/laureates/2001/akerlof-article.html http://www.springerlink.com/content/h3h8530156276515/ http://hydrogen.its.ucdavis.edu/eec/education/EEC-classes/eeclimate/class- readings/akerlof-the%20market%20for%20lemons.pdf
  148. 148. References: Blogs Mind Your Decisions http://mindyourdecisions.com/blog/ Game Theory Strategies http://www.gametheorystrategies.com/ Twitter, Barry Hughes https://twitter.com/#!/gamethry
  149. 149. References: Books Theory of Games and Economic Behavior http://en.wikipedia.org/wiki/Theory_of_Games_and_Economic_Behavior http://press.princeton.edu/titles/7802.html http://www.amazon.com/Economic-Behavior-Commemorative-Princeton-Editions/ dp/0691130612/ref=sr_1_1?ie=UTF8&qid=1310015156&sr=8-1 Rock, Paper, Scissors: Game Theory in Everyday Life http://www.amazon.com/Rock-Paper-Scissors-Theory-Everyday/dp/0465009387/ ref=sr_1_2?ie=UTF8&qid=1310490759&sr=8-2 The Art of Strategy: A Game Theorist's Guide to Success in Business and Life http://www.amazon.com/Art-Strategy-Theorists-Success-Business/dp/0393337170/ ref=pd_bxgy_b_text_c Co-Opetition : A Revolution Mindset That Combines Competition and Cooperation : The Game Theory Strategy That's Changing the Game of Business http://www.amazon.com/Co-Opetition-Revolution-Combines-Competition- Cooperation/dp/0385479506/ref=pd_sim_b_1
  150. 150. References: People John von Neumann http://en.wikipedia.org/wiki/John_von_neumann Thomas Schelling http://en.wikipedia.org/wiki/Thomas_Schelling John Forbes Nash http://en.wikipedia.org/wiki/John_Forbes_Nash John Harsanyi http://en.wikipedia.org/wiki/John_Harsanyi
  151. 151. Photo Credits 100 Dollar Bill Roll http://www.flickr.com/photos/85473033@N00/3367543296 Pennies http://flic.kr/p/6ucLDE http://flic.kr/p/6u8BEa Earth http://flic.kr/p/9DTDXi Dice http://flic.kr/p/9g1aZc Cards http://flic.kr/p/4UwZc6 http://flic.kr/p/6FKnGu http://flic.kr/p/4V67rx Happy Hour http://www.flickr.com/photos/beleaveme/3276175127/ Prison http://flic.kr/p/38wBWq
  152. 152. Other Ideas Bounded Rationality 2-3 event horizon Typing Pooling or separating equilibria Prisoner's Dilemma with an Arbiter Tragedy of the Commons Air pollution Mass transit tickets Overfishing Volunteer's Dilemma Witnessing a crime

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