Strategy Basics I: Rational Decisions

1. Strategy Basics I: Rational Decisions

2. How should we think about the study of politics? • Politics involves constant decision-making • Examples • What education, traffic, economic policies to implement? • What countries should be trade partners? • What should be a tariff rate with a trade partner? • What countries should be allies?

3. Many political decisions are interactive • What is the difference between an interactive and non-interactive decision? • Example • Following a map • Purchasing ice cream • Choosing a career • Firm setting price • Punishing children

4. Interactive decisions in politics? • Hiring bureaucrat to enforce building codes vs. • Supporting allies • Can we conclude that alliances aren’t useful?

5. Strategic Decisions • Interactive decisions are called “strategic” • Why is understanding strategic decisions important?

6. Hot hand example • Why is a player sometimes hot and sometimes cold? • Naïve view might conclude that players are “streaky” • Sophisticated view might conclude that shooting percentages depend on the strategy of the opponents defense, which depends on the strategy of shooter

7. Strategy and International Politics • 国际关系 • 关系 implies interaction • Most decisions are interactive • Examples • Trade交易 • Investment 投资 • Alliances 联盟 lianmeng • Treaties 条约 tiaoyue • Sanctions 制裁 zhicai • War 战争

8. How should we study these decisions in political science? • Goal of political science? • Description -- What? • Empirical regularities • Explanation & Analysis -- Why? • Prediction • Theory answers “Why” question • Normative vs. positive • Inductive vs. deductive reasoning • Holistic vs. methodological individualism

9. Theories of Strategic Decision-making • Theory of choice • Positive, deductive, and meth. Individualistic • Choice implies . . . • Alternatives • Actions • Outcomes • Goals (Preferences) • Constraints • Beliefs

10. Building blocks of theory • Individuals have wants and beliefs, and they maximize. • Wants (preferences) • Where do they come from? • Do they change? • Beliefs (Uncertainty) • Where do they come from? • Do they change? • Maximize (Instrumental actions)

11. Properties of Preferences • Completeness: Preferences are complete if, for any two possible alternatives x and y, either x>y, x<y, or x=y. • Transitivity: A preference relation is said to be transitive if, for any three possible alternatives x, y, and z, if x>y, y>z, then x>z.

12. Maximizing • Actions lead directly to alternatives • Expected utility • The Voice – expected utility decision to hit button on hearing a voice • Conflict initiation

13. Study of strategic decisions is called Game Theory Strategic Game elements • Players • Actions • Outcomes • Preferences • Beliefs • Constraints Let’s discuss each . . .

14. Number of players affects outcomes • Poker • Prisoner’s Dilemma

15. Move sequence • Bargaining (Battle of the sexes) • Agenda setting • Sailing

16. Players hold preferences over outcomes • 走为上 -- "Of the Thirty-Six Stratagems, fleeing is best” • When your side is losing, there are only three choices remaining: surrender, compromise, or escape. Surrender is complete defeat, compromise is half defeat, but escape is not defeat. As long as you are not defeated, you still have a chance.

17. Beliefs and Perceptions • Empty City Strategem (Zhuge Liang’s Campaign against Sima Yi in The Romance of the Three Kingdoms 三国演义)

18. Constraints • 围魏救赵, Wéi Wèi jiù Zhào • When the enemy is too strong to be attacked directly, then attack something he holds dear. Know that he cannot be superior in all things. Somewhere there is a gap in the armour, a weakness that can be attacked instead. The idea here is to avoid a head on battle with a strong enemy, and instead strike at his weakness elsewhere. This will force the strong enemy to retreat in order to support his weakness. Battling against the now tired and low-morale enemy will give a much higher chance of success.