Sublime

choices when the better choice among two possibilities, or the best choice among several possibilities, depends on the choices that others will make or are making.

Taken together, these three approaches—application of knowledge about specific games (prisoner’s dilemma, entry/preemption), simulation, and cooperative analysis—produce a balanced and comprehensive treatment of the problems of formulating strategy in markets with a few genuine competitors, all mutually capable and conscious of one another.

the nonrival character of knowledge creates disincentives for private economic actors—individuals and firms—to produce it.

Rather, after a simulation is run a thousand or a million times, such models show policy makers the range of possible futures and their relative probabilities if policies remain unchanged. Then, by altering policies in the model and running them another million times, we might begin to understand paths to better futures.

One last point: economists tend to be skeptical of any attempt to change people’s behavior that doesn’t change their incentives. For example, a plan that calls on manufacturers to reduce pollution voluntarily probably won’t be effective because it hasn’t changed manufacturers’ incentives.

But increasing the number of dimensions also dilutes the relative strength of the high-resource player. As military strategists have known for years, increasing the number of battlefields often helps the underdog.

Once we understand loss aversion and that many things can be framed as either gains or losses—and that the loss framework is more motivating—maybe we can reframe choices, such as how much to contribute to retirement savings, in a way that will persuade us to act in ways that are more consistent with our long-term well-being.

Each company is trying to figure out how to strategize, how much to invest, what the technology should be. In a case like that, it’s not at equilibrium.