Financial Daily from THE HINDU group of publications
Saturday, Dec 14, 2002

Port Info

Group Sites

Home Page - Economics
Industry & Economy - Economics

The real Beautiful Mind, John Nash, coming

Harish Damodaran
Vipin V. Nair

NEW DELHI, Dec. 13

REMEMBER Beautiful Mind, in which Russell Crowe plays John Forbes Nash Jr, the brilliant mathematician and Nobel Laureate in economics, who turns a paranoid schizophrenic at the pinnacle of his career?

That Beautiful Mind is now actually coming to India. And well, we are talking about neither the 2001 Academy Award-winning movie nor the actor, but the real John Nash!

The 74-year-old Princeton University professor - the `mysterious West Virginia genius' whose disorder led to his losing a coveted research job at the Massachusetts Institute of Technology in 1959 and rendered him virtually incapacitated for the next two decades - will be in Mumbai on January 8 to attend a conference on `Game theory and its applications.'

The three-day event, organised by the Netherlands-based Game Theory Society, is being sponsored by the Taj Group of Hotels and IBM India Research Laboratory. Prof Nash will be speaking on a characteristically esoteric subject - Ideal money and asymptotically ideal money. Besides, he will address a plenary session at the Indian Institute of Technology, Delhi on January 10, where his theme is `Agencies and co-operative games.'

"Prof Nash is indeed looking forward to visiting India. He is absolutely fine and has had complete remission from the illness in the last 20 years or so," said Dr Pradeep Dubey from the State University of New York (SUNY) at Stony Brook, who is one of the main organisers of the conference, billed as the biggest of its kind in the country. Apart from Prof Nash, the event will feature around 80 economists, including fellow Nobel Laureate, Prof Amartya Sen, and two `potential' awardees - Prof Robert Aumann from the Hebrew University of Jerusalem and Prof Lloyd Shapley of the University of California, Los Angeles.

To get an idea of what the conference will be all about, sample a few of the topics: Punctuality - A cultural trait as equilibrium (Kaushik Basu from Cornell); Ecologies of preferences with envy as an antidote to risk-aversion in bargaining (Yaacov Bergman from Hebrew University); Dividing the indivisible - procedures for allocating Cabinet Ministries to political parties in a parliamentary system (Steven Brams from New York University); On the strategic origin of Brownian Motion in finance (Bernard De Meyer from University of Paris).

The game theory is basically a mathematical tool employed by economists to analyse `real' situations and markets, in which the laws of `perfect competition' break down. Conventional economic theory often pre-supposes perfect markets, where there are a large number of buyers and sellers and no single agent can unilaterally influence prices.

The market conditions are, therefore, `given' and all buyers and sellers are individual price-takers rather than price-setters. Further, no seller (or buyer) has to take into account the actions of other sellers (or buyers) and he has to consider only his own situation and the `conditions of the market'.

However, in real life, markets are made up of a few dominant players and the actions of an individual firm not only counts in itself, but also affects the actions and strategies chosen by other firms. Thus, Reliance's decision to lay fibre-optic cables is influenced not just by the size of the broadband market, but also by its perception of rival Bharti's rollout plans.

What the game theory seeks to do is to use games such as chess or poker - in which players have to think ahead and devise strategies based on expected countermoves from other player(s) - as a metaphor for understanding situations where market outcomes depend on strategic interaction between different players. Some of the famous `games' devised to explain such complex interactions are Prisoner's Dilemma, Frogs Call for Mates, Tragedy of the Commons, Hawk versus Dove, Mutually Assured Destruction and Barbarians at the Gate.

Of game theory & spectrum auction

HOW practical is the game theory in terms of having a visible impact on economic decision-making rather than being just a discipline as abstruse as the occult?

The most successful case of game-theoretic ideas finding practical application is said to be the `greatest auction' of 1994, when the US Government successfully sold off large portions of electromagnetic spectrum.

The auction involved careful designing of a multiple-round procedure by game theory experts to maximise both the payoff to the Government and the utility of the purchased wavelengths to the buyers.

The Government netted over $10 billion from the auction, which is also considered to have resulted in efficient allocation of resources.

By contrast, a similar auction in New Zealand, without such a careful game-theoretic design, was a disaster in which the Government realised a mere 15 per cent of its expected earnings and the wavelengths were not efficiently distributed.

In one case, a student ended up buying a television station licence for $1!

Send this article to Friends by E-Mail
Comment on this article to

Stories in this Section
Euro firm; but no cheer for most exporters

Reliance may bid for HPCL
Toyota to launch Corolla in three models in mid-Jan
Gold price zooms to touch Rs 5,450
Inspector raj has to end: PM
The real Beautiful Mind, John Nash, coming
Jalan rules out repo rate cut for now
I-T sops for housing will stay, says Jaswant

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line