Game theory may come into play in Greek negotiations

Tracey Samuelson Feb 13, 2015
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Game theory may come into play in Greek negotiations

Tracey Samuelson Feb 13, 2015
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It was mostly calm Friday in Brussels, Belgium, where Greek debt negotiations are continuing.

Those talks have many layers to them, as the new Greek government doesn’t just want another bailout, but also to reverse some of the reforms Athens agreed to during its original bailout. The Greek finance minister is also a professor of game theory, which has prompted all kinds of game metaphors for the negotiations – from chess to poker to chicken, where neither side wants to change course.

“It’s this very fundamental, simple game theory here,” says Adam Lerrick, a scholar at the American Enterprise Institute. But he says Greece only has one card to play – threatening to leave the euro, which it believes would lead to disruption throughout the entire eurozone.

Nick Spiro of Spiro Sovereign Strategy says that card is a lot less valuable than it once was because Greece’s European partners are less worried about its problems spreading to other countries than they used to be.

While European leaders may not be using formal game theories in these negotiations, Bruce Bueno de Mesquita, a New York University politics professor who specializes in game theory, says they’re likely doing a more seat-of-the-pants version of it. He says we all do that, every day. 

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