1. John von Neumann and Oskar Morgenstern,
2. Sylvia Nasar,
3. Six dollars per day falls in the middle of the World Banks estimate of per capita income for Iraq in 2007. Unlike for most countries, for Iraq the World Bank is not able to provide a firm number. Other estimates seem to be based on the World Banks range.
4. Brian Kolodiejchuk, ed.,
5. See Irene Hau-siu Chow, Victor P. Lau, Thamis Wing-chun Lo, Zhenquan Sha, and He Yun, “Service Quality in Restaurant Operations in China: Decision- and Experiential-Oriented Perspectives,”
6. For the math mavens out there, the circle is a special case in which each dimension is of equal importance to the player. If one dimension is more important than the other, then we should draw an ellipse, each of whose radii reflects the relative importance of the issues. I skip this complicating detail here.
7. Those mathematically inclined and interested in delving more deeply into how it is possible for rational decision makers to move from any policy combination to any other, see Richard McKelvey, “Intransitivities in Multidimensional Voting Models and Some Implications for Agenda Control,”
8. For a careful study of steroid use that is broadly consistent with the values used in this example, see Jenny Jakobsson Schulze, Jonas Lundmark, Mats Garle, Ilona Skilving. Lena Ekstrom, and Anders Rane, “Doping Test Results Dependent on Genotype of Uridine Diphospho-Glucuronosyl Transferase 2B17, the Major Enzyme for Testosterone Glucuronidation,”
9. Bayes’ Theorem allows us to answer the question “What is the probability a person is of a particular type (such as a performance enhancing steroid user) given that they say or do something in particular (such as test positive for steroids)?” To answer this question we must solve the following calculation: Let P stand for probability, R for being a steroid user, S for testing positive, and ?R for being the type of baseball player who does not use steroids. The straight line symbol | is read as “given.” Then read as “the probability of being a steroid user given that you tested positive (P[R | S]) equals the probability of testing positive given that you are a steroid user times the probability of being a steroid user divided by that same quantity plus the probability of testing positive given that you are not a steroid user times the probability that you are not a steroid user.” Thus, the calculation is conditioned on the two sets of people who test positive: those who use steroids and those who don’t. In the baseball example this translates into
Chapter 3: Game Theory 102
1. The first major efforts to show that arms races lead to war are the work of Lewis Fry Richardson, a distinguished meteorologist who predicted World War I but, using the same logic, failed to anticipate World War II. See his
2. The subject of renegotiation-proofness has attracted the interest of many economists, leading to a vast literature. Some seminal papers include Dilip Abreu, David Pearce, and Ennio Stacchetti, “Renegotiation and Symmetry in Repeated Games,”
3. The seminal work on this question dates back to the eighteenth-century French philosopher, mathematician, and nobleman the Marquis de Condorcet. Regrettably, the latter characteristic—he opposed beheading the king and queen—cost him his life during the French Revolution. There is a wonderful statue of him on the left bank of the Seine, not too far from Notre Dame. I always pay homage to him when I am in Paris. His insights were built upon in the second half of the twentieth century to establish the modern understanding of voting methods. See, for instance, Kenneth Arrow,
Chapter 4: Bombs Away
1. Stanley Feder, “Factions and Policon: New Ways to Analyze Politics,” in H. Bradford Westerfield, ed.,
2. This is a casual statement of the median voter theorem, one of the most important concepts in understanding issue resolutions. See Duncan Black,
3. This second first-cut prediction relies on the mean voter theorem. See Andrew Caplin and Barry Nalebuff, “Aggregation and Social Choice: A Mean Voter Theorem,”
4. See Bruce Bueno de Mesquita, “Ruminations on Challenges to Prediction with Rational Choice Models,”
Chapter 5: Napkins for Peace