situations communication is restricted. Schelling shed considerable light on the game-theoretic issues involved in reaching coordinated solutions to such social problems. Some of Schelling’s later work applied game theory to the rapid change in some neighborhoods from a mixture of races to being largely segregated, and to limits on individual control over behavior—why people do so many things they really don’t want to do, like smoke or drink too much, while not doing things they really want to, like exercising.

2005’s other economics Nobel winner, Robert Aumann, has long been a leading force in expanding the scope of game theory to many disciplines, from biology to mathematics. A German-born Israeli at the Hebrew University of Jerusalem, Aumann took special interest in long-term cooperative behavior, a topic of special relevance to the social sciences (after all, long-term cooperation is the defining feature of civilization itself). In particular, Aumann analyzed the Prisoner’s Dilemma game from the perspective of infinitely repeated play, rather than the one-shot deal in which both players’ best move is to rat the other out. Over the long run, Aumann showed, cooperative behavior can be sustained even by players who still have their own self-interest at heart.

Aumann’s “repeated games” approach had wide application, both in cases where it led to cooperation and where it didn’t. By showing how game theory’s rules could facilitate cooperation, he also identified the circumstances where cooperation was less likely—when many players are involved, for instance, or when communication is limited or time is short. Game theory helps to show why certain common forms of collective behavior materialize under such circumstances. “The repeated-games approach clarifies the raison d’être of many institutions, ranging from merchant guilds and organized crime to wage negotiations and international trade agreements,” the Swedish academy pointed out.

While Nobel Prizes shine the media spotlight on specific achievements of game theory, they tell only a small portion of the whole story. Game theory’s uses have expanded to multiple arenas in recent years. Economics is full of applications, from guiding negotiations between labor unions and management to auctioning



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement