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 .
Some 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. It’s 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, you’ll 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 gambler’s day, because it’s 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. That’s 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 strikes.
“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 doesn’t. So whatever the shareholders say, the employees have no reason to believe them. Opening the books to the union won’t do the job; there are too many tricks to hide money. “It’s cheap talk, it’s 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 doesn’t 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 didn’t 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 can’t choose their strategies independently. To be successful they have to figure out what the other party’s 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 competitor’s cards are. But in wage negotiations, only a strike will reveal what the company’s wallet really looks like.
A closer look at the press coverage of the 1994 baseball strike yielded plenty of evidence for Wilson’s theories. “We owners didn’t have much credibility. The players simply didn’t 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 Magowan’s 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 don’t 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 can’t 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 ë’here’s 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 Dean’s “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 gambler’s sincerity. A bead of sweat on the opponent’s 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 couldn’t 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 weren’t 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 Wilson’s work is an essential contribution to the understanding of how people negotiate. “Wilson’s 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 Nash’s 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 70’s economists realized that many biologists were interested in very similar problems,” says Povel. “They contacted them and said ëHey, 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 hadn’t 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 didn’t 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. UCSC’s 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 male’s 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 can’t afford to be orange: they are blue. But they don’t fail to recognize the flag. “They are terrified by the orange color,” says Sinervo.
The orange color is a precious commodity in nature. The dye is made of carotinoids, which the animals can’t 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 don’t even think of trying to beat up an orange.
But for the usurper males the orange color also serves another purpose. “It’s 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, I’ve 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. “It’s yet another game – it’s 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.
WRITER Reto F. Kohler Ph.D., University of Fribourg, Switzerland. 1999; Science Communication Program, UCSC, 2000