Although many individuals would feel uncomfortable having a computer make decisions for them, many organisations run such computer simulations for law firms, companies and governments. But feeding software with accurate data on all the players involved is especially tricky for political matters. Reinier van Oosten of Decide, notes that predictions may become unreliable when people unexpectedly give in to ‘non-rational’ emotions, such as hatred, rather than pursuing what is apparently in their best interests.
In 2006, in the run-up to an online auction of radio-spectrum licences by America’s Federal Communications Commission, Dr Paul Milgrom customised his game theory software to assist a consortium of bidders. He was apprehensive at first, but the result was a triumph. Crucially, the software estimated the secret values bidders placed on specific licences, and determined that certain big licences were being overvalued. Milgrom’s clients were then directed to obtain a collection of smaller, less expensive licences instead.
By studying a chain of events such as this, software designers can assess the effect of change and see the patterns in possible outcomes that may occur. As a result, the use of modelling makes clients more inclined to look at future repercussions when making business decisions, Black says.
Dr Clara Ponsati accepted that, as negotiators everywhere know, the first side to disclose the maximum amount that it is willing to pay loses considerable bargaining power. Without leverage, it can be pushed backwards in the bargaining process by a clever opponent.
But if neither side reveals the concessions it is prepared to make, negotiations can become very slow or collapse. However, difficult negotiations can often be pushed along by neutral mediators, especially if they are entrusted with the secret bottom lines of all parties. Ponsati’s idea was that ‘mediation machines’ could be employed to push negotiations forward by unlocking information that would otherwise be withheld from an opponent.
Questions
1. According to Reiner van Oosten, game theory software falls when
2. Dr Milgrom’s software is successful in detecting if
3. Dr Black’s game theory software is a helpful tool when
4. According to Dr Ponsati, negotiators fall behind if