A furtive glance, a nervous
chat, and finally you dare to ask that girl for her phone number. When
you meet her on a first date, you will wear your best shirt and your new
Italian shoes, and when you drive her to the new Greek restaurant your
car will be freshly waxed. When humans date, they do pretty fancy stuff
animals, however, do even more stunning things. For bragging rights, certain
male lizards develop bright orange scarves around their necks. Because
these capricious ornaments are biologically costly for the lizards, male
lizards try to impress females by showing that they are strong enough
to waste some of their energy on fancy displays, says Barry
Sinervo, a behavioral biologist at the University of California, Santa
Cruz (UCSC). Indeed, many animals and humans show off their strength by
flashing these seemingly inefficient and wasteful signs. Its a form
of conversation that not only rules dating but also many other conflicts,
such as wage negotiations between unions and firms.
This is the conclusion of
a group of researchers who call themselves game theorists. The researchers
use games like poker as metaphors to try to explain strategies that conflicting
parties use when they either disagree or try to persuade their opponents
to adopt their own points of view. Economists were the first to use mathematics
to model such situations. They view trading situations as games between
consumers and sellers, and wage negotiations as matches between unions
and companies. Later, scientists from different fields started using the
same models and helped to move the field forward. For instance, evolutionary
biologists explained the strange dating behavior they observed in lizards
and birds using game theory.
One of the most important
conclusions of game theorists dealing in both biology and economics is
that arguing parties notoriously distrust each other. Whether you are
a lizard or a shareholder, youll have to make a hell of an effort
to ensure that your opponent believes you. This is because in trading
and dating, being dishonest is often a successful strategy.
Game theorists have found
that in many everyday situations people behave like poker players in a
gambling hall. A good gambler lets other players at the table believe
that his hand is unbeatable. For this strategy to succeed, it is essential
to stay cool at all times. Calmness is the secret of fortunate gigolos
and triumphant poker players alike. One involuntary tick of the eyelid
can ruin a gamblers day, because its a sign of weakness that
may cause the others to raise the stakes.
"Poker is a classic game
where different people have different information," says Wilson,
an economist at Stanford Business School. "If you are a player in
poker you know the cards you have. Thats your private information,
your wealth," he says. Wilson found that the rules of play in poker
are similar to many human situations of conflict. In his work, he aims
to describe how unions and companies behave in wage negotiations and labor
"Like in poker, the difference
in information between the parties is the usual source of the difficulty
in reaching an agreement," he says. Company owners know how wealthy
their firm is, but the union doesnt. So whatever the shareholders
say, the employees have no reason to believe them. Opening the books to
the union wont do the job; there are too many tricks to hide money.
"Its cheap talk, its not believable," says Wilson.
"A strike is a process
of signaling," Wilson says. During the wage negotiations that usually
precede a strike, the stances of the parties are obvious. The union asks
for wages that the company doesnt want to pay. The workers argue
that they need more money to feed their families. The employers reply
that if they paid higher salaries, the firm might go bankrupt.
Wilson used the 1994 players
strike in major league baseball as a model to find general rules of how
people compete and disagree. The strike shook the world of sports and
put a serious damper on fans enthusiasm for the World Series. When
club owners tried to explain their financial situation, they drew scenarios
of bankruptcy and disaster. But the players didnt believe them.
So there was no way for an easy settlement, and painful and expensive
walk-out was inevitable. Wilson found that many of the mind games that
poker players employ where also used in this and other strikes.
As a tool to strip conflicts
of their emotional aspects, he used the mathematics of game theory. The
models he developed can explain why wage negotiations between workers
and employers sometimes escalate into a strike. During a strike, negotiations
are usually halted. But Wilson thinks this silence is an effective way
of telling each other the truth.
In a strike, two parties of
decision makers collide. But they cant choose their strategies independently.
To be successful they have to figure out what the other partys next
move is. And in that sense, every negotiation is a game.
What separates labor negotiations
from poker is that there are no obvious rules of play. In the former,
conflicting parties define the allowed moves and countermoves ambiguously,
if at all. In a poker game, players raise the stakes to find out how good
a competitors cards are. But in wage negotiations, only a strike
will reveal what the companys wallet really looks like.
A closer look at the press
coverage of the 1994 baseball strike yielded plenty of evidence for Wilsons
theories. "We owners didnt have much credibility. The players
simply didnt believe us when we told them we were feeling economic
stress," Giants president Peter Magowan told the San Francisco
Chronicle.1. "Baseball is financially healthy. The claim of widespread
disaster is pure fiction," said players consultant Peter Noll
in an interview with the Wall Street Journal, confirming Magowans
assumption .2. Players just did not believe club owners, because there
was no way for them to get their hands on credible sources of information.
Unions and employers often
dont talk to each other at all during the initial phase of a strike.
Enduring the strike is nerve-wracking. As on a first date, the ability
to stay cool separates the men from the boys. A prosperous firm that has
hidden money from the union during the wage negotiations will get nervous
after the first few days of a strike. Soon its managers will realize that
raising wages is cheaper than enduring the strike any longer. However,
the workers who cant sustain their families with their old salaries
have little to lose. They will stay away from work until the company submits
a better offer. Because for both of them the strike gets more expensive
every day, endurance is a sign of honesty. "The signaling between
the two parties is the dominant feature, and endurance serves as a credible
signal," says Wilson.
The signals that the negotiators
exchange are costly, and hence they are credible. A bluffer gives up sooner,
because it is simply too expensive to mimic the strategy of an honest
player. Only the poker player who does not bluff, or can afford to lose
a lot of money, will agree to raise the stakes above a certain limit.
When the time is ripe only the self-confident lover will say heres
looking at you, kid without making a fool of himself.
Being cooler than your opponents
is what counts. In the game of "chicken," which game theorists
use to model such situations, two drivers head toward each other at high
speed in the hope that the other will swerve first. The worst outcome
of the game is a crash, or a jump over a cliff as in James Deans
"Rebel without a Cause." In a labor walk-out the choices and
their respective payoffs and costs bear striking similarities to "chicken."
In a strike, however, the
worst-case scenario is that the company goes bankrupt - not usually through
the price of higher wages, but due to the cost of the strike. Both the
union and the firm would profit when their opponent "chickened out"
first and cooperated with their wishes.
To prevent an outcome that
is a catastrophe for both parties, players observe each other very carefully.
But opponents send out signals on other levels, too. In poker it is not
only the cash put on the table that can prove a gamblers sincerity.
A bead of sweat on the opponents forehead can tell you that his
"full house" is only a pair.
A subtle signal like this
helped to end a 1994 faculty strike at Hebrew University in Israel. The
professors, dissatisfied with their salaries, stopped teaching. After
initial offers, the Israeli government and the union couldnt reach
an agreement. The professors went on strike and refused to negotiate for
eight weeks. Then a key faculty vote at Hebrew University revealed that
98 percent of the professors were willing to pursue the strike much longer.
Government officials realized that the professors werent sweating
a drop - they were ready to go all the way. Shortly after that a better
offer was on the table, which put an end to the students holidays.
The settlement in Israel was
a compromise between the two parties. Neither the government nor the professors
were fully satisfied, but they were content enough to return to business
as usual. Both players were motivated to minimize their concessions. In
the end, though, neither party ended up eating the cake all on their own,
but both of them tried to get the bigger piece nonetheless.
Paul Povel, an economist at
the University of Minnesota, says that Wilsons work is an essential
contribution to the understanding of how people negotiate. "Wilsons
model to interpret patience as an honest signal will be a valuable tool
to explain many other examples of conflicts too, " he says. "One
problem we will have to solve in the future is to develop mathematical
equations for these situations to make more accurate predictions."
"For me Wilson is a candidate
for the Nobel Prize," says Alvin Roth, an economist at Harvard University.
"His work on strikes is really earthshaking."
Because in the beginning of
a labor strike no party has a reason to collaborate, game theorists refer
to this situation as a "non-cooperative game." John Nash, a
mathematician at Princeton University, made such disagreements accessible
to mathematics. For his achievement, which he published in 1950, he was
awarded the Nobel Prize in economics more than 40 years later, in 1994.
For 20 years after he published
it, nobody realized how important Nashs triumph was. But suddenly
the penny dropped. "This literature then just sort of exploded during
the 70s and 80s," says Wilson. "Economics was almost revolutionized
by game theory," he adds.
Economists soon understood
how fundamental their game theory-based mathematical models were and that
the concepts serve totally different purposes. "In the 70s
economists realized that many biologists were interested in very similar
problems," says Povel. "They contacted them and said Hey,
we developed some fancy equations that might solve your problems."
Soon researchers of different fields started to have tete-a-tetes, which
led to an odd phenomenon: some leading economists started to publish their
results in The Journal of Theoretical Biology. Biologists read
these papers and realized that game theory might help answer questions
they hadnt yet addressed.
One such example is the observation
that the male of a given animal species often looks totally different
from the female. In humans those differences are subtle. Both sexes look
very similar. But when it comes to certain exotic bird species, males
and females look so different that at first glance nobody would suspect
that they share the same nest. This so-called sexual dimorphism was one
of the biggest unsolved mysteries of biology for many decades.
What puzzled biologists the
most was the fact that males of certain species developed traits that
didnt seem to make sense. Some male birds, like the peacock, developed
such long tail feathers that they could hardly fly. Why would a bird want
to trade his flight machinery for a trendy costume? Why human playboys
wrap silk scarves around necks is obvious, but in a world where survival
of the fittest is the name of the game, these opulent decorations seemed
odd. Then, behavioral biologists started to use the game theory models
offered by economists. They found that birds and lizards use capricious
traits in the same way that gamblers and strikers show off their coolness.
Birds and lizards use deluxe dresses and elaborate colors to show how
strong they are.
The premier goal of a male
animal, however, is not to get higher wages, but to create as many offspring
as possible. The measure of success is not money, but access to females.
To fertilize as many females as possible, a male has to attract them and
scare off potential rivals. Males who manage to signal their strength
faithfully will achieve both of these goals at the same time.
Some lizards have developed
a special way to look good and show off their force. UCSCs Barry
Sinervo studies male side-blotched lizards in the Coast Range of California.
The strongest and largest of them have bright orange necks. Orange-type
males are 20% longer and have 50% more of the sex hormone testosterone
circulating in their blood. "They are bulky, like football players,"
says Sinervo. "We call them usurper males; they can literally dust
the others in battles," he adds.
The orange color, which dyes
their necks, serves as a badge of status. "Badges of status evolved
because they are honest indicators of a males ability in a conflict,"
says Sinervo. "The badge makes the orange male not to have engage
in contests with other males that are of lower quality." Weaker males
cant afford to be orange: they are blue. But they dont fail
to recognize the flag. "They are terrified by the orange color,"
The orange color is a precious
commodity in nature. The dye is made of carotinoids, which the animals
cant synthesize themselves. Rather they have to take it from the
food they eat, which means that they use part of their energy uptake for
showy effects. Thus only strong males can afford to use energy for decoration.
But the investment pays off, because blue males dont even think
of trying to beat up an orange.
But for the usurper males
the orange color also serves another purpose. "Its probably
also a signal to the females," says Sinervo. He thinks that the message
macho lizards have for their females is: "I am so healthy, Ive
got so much of these carotinoids around, so I can actually afford to show
off a little."
Because females want to have
healthy kids, they look for a healthy mate. And in a test series, Sinervo
and his colleagues found that the orange males immune systems indeed
did better fighting diseases. "Its yet another game - its
a mate choice game," says Sinervo. In this case the purpose of the
super males orange scarf is to be handsome.
Yet, the usurpers can go too
far. If they dominate the population too drastically, the females may
suddenly switch their attention. They start choosing males of different
colors, who apply less aggressive strategies.
The orange male does not always
get all the dates. When there are too many machos out there, females prefer
the more decent characters. Environmental changes cause the line between
good and bad, cool and uncool, and between brave and fearful to dwindle.
There are more than two parties and each of them has a different strategy
and each of them can be successful under certain conditions.
Sinervo thinks the future
of game theory will be used to explain contests like those in which not
only two but many players participate. Many two-way games, such as labor
strikes, are more complex than they appear to be. "In strikes the
company actually has to worry about competitors," Sinervo says. In
the beginning of a poker game more than two players participate. Each
of them might have a different strategy.
Just as in some seasons slimmer
lizard males are en vogue, tastes are variable in humans, too. Bulky males
and jocks are not always popular with all females. Although ideals of
beauty sometimes seem to converge to archetypes, the fact that we all
look different shows that the mating game is complex.
And accordingly the systems
of signals has many levels. The real challenge for the players is to search
for the truthful indicators of status. Bad players try to hide information
the way a gambler covers his lousy pair. Voiceless signals, however, will
reveal how much trouble he really is in. A tiny bead of sweat is enough.
At other times players shout, out their messages loudly using flags like
shiny colors or cars.
Game theorists are on the
verge of understanding these silent messages. They are beginning to hear
the speechless chat that influences many of our decisions, by holding
their mathematical stethoscopes on the breast of our behavior.
More mathematical research
is needed before game theorists will be able to come up with models that
explain complex behavioral games in detail and give us advice.
But next time you are paying
the bill in that Greek restaurant, before you are walking your date back
to your freshly waxed car, remember that you are basically behaving not
much sophisticated than a bulky orange lizard.
.1 San Francisco Chronicle,
15 September 1994
.2 Wall Street Journal, 15