Game Theory

The world around us is full of various situations that are not easy to answer at the first sight and from the first try. Many of those situations are very complicated and require certain models to follow in order to find appropriate solutions.

Very often, especially in law and litigation practice in order to understand who has convicted the crime, parties apply those lifetime situations into the so-called game theory. It is a study of various possible mathematical models of cooperation and conflict during the strategic decision-making process.

The main topic of this essay is the exploration of the application of game theory in the law or litigation practice and its usefulness. Before answering this question, let us first explore the meaning of the term and attempts of its application by various scholars.

Chu-Carroll (2008) presents a brief introduction of the medium of the game theory. As other authors (Brams, 1978), the scholar draws the parallel of the game theory as typical of mathematical science. He mentions the reduction by mathematicians of certain things to fundamental abstract systems or structures while trying to understand them within the frames of the abstraction.

Thus, Chu-Carroll (2008) is positive that the game theory is about game abstraction. Because of such reason and depending on the abstraction level, it can be applicable to a wide
range of notions besides those that the reader might typically consider as games.

In general, game consists of at least two people who perform certain actions having their own interests, which they try to satisfy in that game. The players have a certain situation that is a set of things. The game consists of particular rules that describe what actions and when the players should take in a particular situation.

Game theory is about looking at that situation and trying to understand the interactions between players. However, it is possible to analyze it from a pure theoretical perspective trying to find various optimal strategies, which characterize a certain type of game. For example, for some games it is possible to find the winning strategy for the first player, for other games there can be the one either for both of them or for the first.

At the same time, it is quite possible to use game theory for those situations that might not seem very game-like, for example, law practice and litigation. Moreover, any situation where there is a place for multiple agents’ interactions with both conflicting and distinct goals, it is quite possible to analyze it within the frames of the game theory.

There is a classic example of the game theory that is called the prisoner’s dilemma. The actors, in this case, are two criminals who were arrested for a murder. Those two criminals who are already prisoners are the agents, so the police representatives are aware of the fact that they did it, however, they lack the evidence to convict them of what they did. Thus, the police decides to make them betray each other.

As the result, there are a couple of options of the possible scenario. For example, if neither prisoner betrays the other, they will end up with six months in jail and a very light sentence. However, if one of them betrays the other, that one will be free and the other will get a life sentence. At the same time, if both prisoners betray each other, they will both spend ten years in jail.

If to look at this satiation from aside, it seems obvious that the prisoners should both keep silence, so they have the least punishment. However, if to look at this question from the point of view of the cost-benefit analysis, only for oneof them the answer will be quite different: for the one that acts to satisfy his own self-interest, the only appropriate choice of behavior will be to betray his partner. Thus, the game theory looks at this question from the point of view of the latter. In this case, each agent is merely interested in minimizing the penalty and maximizing the benefit for oneself.

Despite the fact that game theory is typical of mathematical science, it is an approach for the analysis of situations that have been frequently used in economics and law-and-economics. Rasmusen (2006) states that its most active usage started in 1970 and declined by the year of 2000.

Drawing a parallel with the economic theory developed by Adam Smith, the scholar states the limitations of supply and demand curve when we apply it to the law subject (Rasmusen, 2006). He explains two difficulties that arise when trying to explain the notion of legal penalty as a price for legal obligation or breaking a law.

The first reason is the asymmetric information that is quite uneasy to incorporate into the demand and supply terms, which is a common ground for law. The second reason is connected to the question of the price, which is not often taken by the legal actors as given. They bargain to either reduce it or somehow avoid paying it. In the other case, as Rasmusen (2006) states, they have to “buy the product” without being aware of what price they will be made to pay by the regulator or court. However, the described above problems have a place in economic settings as well.

While describing the litigation cost strategies, settlement offers, and game theory, Macey-Dare (2007) starts with the explanation of the simple economic model of the civil litigation value from the perspective of those three notions. The scholar continues with the analysis of the specific issues such as optimal settlement timing and agreement and principal-agent problems that are put on the same line with the cost incentives of the lawyer, optimal client-lawyer contracts, the mitigation and exploitation of bankruptcy and liquidity, insights of game theory, etc. (Macey-Dare, 2007).

The author presents practical scenarios with figures to demonstrate how different parties perceive cost-benefit analysis in various satiations. Macey-Dare (2007) further explains how such notions as meditation and alternative dispute resolution may fit within the frames that are mentioned in those scenarios.

The conclusion is that during the trial of the civil case, both sides will have a chance to argue about the costs in front of the judge. At the end, they have to present their case in terms of the reasons why the client should pay more and the opponent fewer. As experience suggests, there is a little time to prepare such costs connected application in front of the judge, which means that the effect on costs payable is very high. For the aforementioned reason, it is advised to the barristers to spend more time on their previous preparation of those cost submissions.

While some scientists try to understand the main accomplishments of the game theory and the ways it can be applied to litigation practice (Aumann, 1985; Brams, 1978; Osborn & Rubinstein, 1994), Ayres tries to persuade the audience of the opposite (1990). He is convinced that within the next decade there will be little conflict concerning the appropriateness of the game theory usage in the litigation practice (Ayres, 1990).

The scholar is convinced that not all of the possible battles will be conducted on the scientific ground as all those questions in the academia circles will be balanced. Ayres (1990) tries to explain that the models of the game theory may be modified by generating different policies compared to other modes of economic analysis or law. At the same time, the scholar does not reject the fact that all those issues may provoke further deliberations by the governments that may try to seize the aforementioned reasons within the scientific area (Ayres, 1990).

Ayres (1990) is convinced that the supporters of the methods of economic reasoning may attack game theorists. At the same time, the scholar does not deny the idea that the advocates representing economic and law community may assault the game theory supporters as well. Moreover, the scholar does not deny the fact of the influence of information and politics considering them those factors that have affected various scientific fundamental concepts for all times.

As we see, the game theory is not an abstract notion that mainly takes its roots from mathematics and economics. It is all about finding and applying conceptual solutions to various game-theoretic models.

Various scholars are trying to demonstrate the ways in which the theory can be applied in the law and litigation practice. However, the main idea is the necessity of the differentiation between its clear application and influence of the government and politics on this decision-making process.

It is essential to understand game-theoretic concepts within the frames of their direct application. They should be also judged by the quality and quantity of those applications. They should reflect on the solutions and demonstrate their different interpretations to unify various rationality aspects in the decision-making process.

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