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This says we can't use game theory to analyze this situation, but the only argument given in support is that humans aren't rational. "Irrational" (or otherwise

by Natsu 11y ago

This says we can't use game theory to analyze this situation, but the only argument given in support is that humans aren't rational. "Irrational" (or otherwise emotional) strategies are by no means outside of the analysis of game theory. It's well known that by "irrationally" eliminating one of your choices, you can push your opponent into different options. For example, take this infamous episode of split or steal: https://www.youtube.com/watch?v=S0qjK3TWZE8 https://www.youtube.com/watch?v=S0qjK3TWZE8 One side makes a choice to go with perhaps the most "irrational" choice. But if you think about it for a bit, it's obvious that they end up guaranteeing the better choice for both parties by being less greedy than they might be. Anyone interested in the topic of rationality as it pertains to game theory might also like reading this: http://www.dklevine.com/archive/refs4375.pdf http://www.dklevine.com/archive/refs4375.pdf

bduerst 11y ago
Well said - the point the article missed is that the politicians in the E.U. are still behaving rationally, even if the countries are not. If the politicians agree to an austere fiscal policy with the Euro, it will mean setting their economy back in a very visible manner and jeopardize their re-election chances. The countries in the E.U. are still very nationalized, and competing political incumbents will be able to spin the policies as sacrificing their own country for someone else's mistakes. The politicians are still acting within their best interests to keep their jobs, even if that means sinking the Euro.
iofj 11y ago
Game theory works fine. Tsipras simply blinked. The power of Greece's argument was that in a case of a Greek default, the EU could either do their current QE * 30 for a month or two, paying all of it to Greece's lenders (like they did in 2008), or face nearly all regional banks going bankrupt. Discussions weren't going well. The EU froze most of Greece's bank accounts, and ... then Tsipras simply gave in, seemingly getting very little in return.

by Natsu 11y ago

bduerst 11y ago

Well said - the point the article missed is that the politicians in the E.U. are still behaving rationally, even if the countries are not. If the politicians agree to an austere fiscal policy with the Euro, it will mean setting their economy back in a very visible manner and jeopardize their re-election chances. The countries in the E.U. are still very nationalized, and competing political incumbents will be able to spin the policies as sacrificing their own country for someone else's mistakes. The politicians are still acting within their best interests to keep their jobs, even if that means sinking the Euro.

iofj 11y ago

Game theory works fine. Tsipras simply blinked. The power of Greece's argument was that in a case of a Greek default, the EU could either do their current QE * 30 for a month or two, paying all of it to Greece's lenders (like they did in 2008), or face nearly all regional banks going bankrupt. Discussions weren't going well. The EU froze most of Greece's bank accounts, and ... then Tsipras simply gave in, seemingly getting very little in return.