The Art of Strategy

"So how's the book?" was the wife's question not long after dad lent me his copy of Dixit and Nalebuff's The Art of Strategy: A Game Theorist's Guide to Success in Business and Life.

"I haven't gotten around to it," was my reply at the time, "but I'm willing to bet it's got a few chapters about prisoner's dilemma games, stag hunts, overfishing and bargaining."

And I was right.

Some backstory to this: in my second year of grad school, I also signed up for a course on game theory. It was a practical and applied course that covered the key concepts and analytical tools associated with the branch of economics. Decision trees. Backwards induction. Pure and mixed strategies. Nash equilibria. Subgame perfect equilibria. And so on.

Although there was a text assigned for the course, it was a compromise decision on the part of our Professor. Sure, we were encouraged to check out von Neumann and Morgenstern's classic Theory of Games and Economic Behavior, but for how this course was set up that would have been too technical as a primary text. Consequently, we ended up with a basic text (that will remain nameless) useful for its exercises and examples, if not particularly for its breadth and depth. In the process, I learned quite a bit about game theory as explained in the context of prisoner's dilemmas, stag hunts, overfishing and bargaining -- all classic cases used in the study of game theory.

In this regard, reading through The Art of Strategy I was struck by how it would have been an ideal text for that course, owing both to its coverage as well as its practical approach to game theory.

It goes without saying that game theory can be complicated, yet Dixit and Nalebuff's book is perhaps as accessible a reader on the subject as one can find. It shies away from technical jargon yet offers a fairly comprehensive discussion of those key concepts and classic examples that have aided in the development of game theory. But where The Art of Strategy really excels is in demonstrating to readers the broad application that game theory has whether you're a person out to lose some weight or a corporation that engages in auctions for scarce resources.

In fact, as I was reading it I couldn't help but look for my old notes just for good measure. On balance, I think that's as good an endorsement of the book as any.