QR 38 Conclusion, 5/3/07 I.Why game theory is a useful tool for studying international relations II.Key insights from game theory for IR III.Limitations of game theory for studying IR

Ways in which game theory is a good match for studying IR Rationality: the need to calculate costs and benefits of different policy choices, compare all the options Strategic interaction: outcomes depend on the interaction of different players’ choices; –players react to one another

Good match Can integrate uncertainty of various types: provides a way to analyze beliefs and how they are updated (Bayes’ Rule) and to study the dynamics of signaling, reputation, etc. Can apply to different units of analysis (states, organizations, leaders, interest groups, coalitions)

Good match Provides a unified framework for studying different issue-areas Can explicitly build in features of interaction, such as the order of moves or voting rules No restrictions on payoffs (except transitivity)

Good match Can study how reputation matters Can integrate probabilistic outcomes Forces us to ask whether anyone has an incentive to unilaterally deviate from a given pattern of behavior (the basic idea of a Nash equilibrium)

II. Important insights for IR The importance of anticipated reactions Credibility: –identifying credibility problems; equilibria –ways to enhance credibility such as brinksmanship –the utility of tying your own hands How the shadow of the future matters Signaling; the weakness of cheap talk Value of joining alliances and other collective groups

Important insights Selection effects Reputation Conditions for cooperation How domestic considerations matter How international regimes (institutions) matter; how they should be designed

III. Limitations of game theory Multiple equilibria Cognitive limitations: –experiments –prospect theory –bounded rationality –behavior in crises –complexity and using rules of thumb What are the appropriate units? Social choice problems

Limitations Players must know the structure of the game; common knowledge assumption is strong (perhaps especially when applied to beliefs) Analyst must know payoffs with some precision Logic of appropriateness (role-playing, identity) versus logic of consequences Role of emotions (affect)