Gaming the System

Fundamentals of Game Theory

Artwork credit to ncase.me/trust - an interactive demo of prisoner's dilemma

Game Theory

"... is the study of mathematical models of strategic interaction between rational decision-makers. It has applications in all fields of social science, as well as in logic and computer science."

The Prisoner's Dilemma

"... is a standard example of a game analyzed in game theory that shows why two completely rational individuals might not cooperate, even if it appears that it is in their best interests to do so."

The Game

"Two members of a criminal gang are arrested and imprisoned. Each prisoner is given the opportunity either to betray the other by testifying against them, or to cooperate with the other by remaining silent."

Choice and Consequence

Tournament Rules

  • Form groups of 2 players each
  • Each group will make 5 decisions total
  • Take your points after each decision
  • After the last decision, count your points
  • In each group, the player with the fewest points is ELIMINATED
  • Any TIES are settled with a coin toss
  • Form new groups of 2 players each and continue until one player remains

Changing the Rules

  • Form groups of 2 players each
  • Each group will make 5 decisions total
  • Take your points after each decision
  • After the last decision, count and write your points on a piece of paper
  • ALL PLAYERS CONTINUE
  • Form a new group with a different player and start a new match
  • The tournament ends after 4 matches have been played
  • The player with the most points wins!

What's the Best Strategy?

  • Depends on the rules of the system
  • In the elimination tournament?
  • To always cheat is the best strategy
  • In the every player continues tournament?
  • Cooperate then copy the last move of the other player - also known as "Tit for Tat" - is the best strategy

Real-World Applications

  • Bitcoin Mining!
  • Miners use computers to solve computational puzzles
  • When a miner solves a puzzle, they are permitted to create a new "block"
  • A block is a chunk of data (transactions)
  • The miner decides which transactions to include in the block
  • In the new block, the miner gives to themselves 6.25 newly created bitcoin
  • The miner also gets all the transaction fees in the block
  • If the miner cheats (breaks the rules), then the block is rejected by the network, and the miner receives nothing
  • Miners are incentivized to cooperate and follow the rules set by the majority of the bitcoin network

Thanks!

degreesofzero.com/talks/gaming-the-system

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