How Can Game Theory Be Applied to Solve Social Problems?

Game theory, which studies strategic decision-making[1], provides a toolkit for analyzing and resolving social problems. It helps illuminate how players’ expectations—shaped by the current context—along with the need to account for their interests and establish counterbalances, determine the final outcome of a “game.”

Game theory teaches us to take into account the other side’s reaction—the other “player,” which may be an individual, a group, or even an entire society. Put differently, each of us needs to look at ourselves through the eyes of the other player and try to grasp that player’s interests and motivations. Let us consider why this is important through several examples. One of them is based on the role of perceptions of one another and mutual expectations.

We invite you to solve an investment puzzle. You and nine other people each have 500 hryvnias. You may invest any portion of this amount. The next day, the total amount invested doubles, and the profit is divided equally among everyone. How would you solve this problem?

If everyone invests 500 hryvnias, the “common pot” holds 5,000 hryvnias, which grows to 10,000 the next day, and each person receives 1,000. But what happens if someone decides to invest zero? Then the pot contains 4,500, which doubles to 9,000, so each person gets 900. Yet the person who invested nothing also keeps their “yesterday’s” 500, ending up with a total of 1,400. In other words, that person benefits at the expense of the others. And it is easy to see that the fewer people invest, the smaller the collective payoff becomes: for example, if only four out of ten players invest, the pot is 2,000 x 2 = 4,000, so each person receives 400, while those who did not invest end up with 900 (their “yesterday’s” 500 + “today’s” 400).

This puzzle is one illustration of a public good game. The social payoff is highest when everyone contributes (10,000 hryvnias in our example). But when a participant chooses a selfish strategy and becomes a free-rider, the overall payoff is always lower (9,000 instead of 10,000 in our example). And the more such people there are, the smaller the collective benefit.

We encounter real-world examples of this game very often. Today, for instance, Ukrainian society is trying to find enough people willing to join the Armed Forces to hold the front line and to make regular rotation and full demobilization possible.

At the same time, victory will be shared by all Ukrainians—those who served, those who did not, and those who left the country. From a selfish standpoint, therefore, the “optimal” strategy is to evade service. In such a situation, increasing the “cost” of draft evasion (for example, through penalties) is justified for the sake of the public good—namely, protecting the country from occupation and destruction.

 It may seem that the solution to a public good game is always a selfish strategy. But this is not the case. It becomes the solution only when a society is dominated by values of individual survival, distrust, or hostile attitudes toward one another. When people are divided by more than what unites them, investing in the common good truly seems senseless. Under such conditions, everyone reasonably expects others not to contribute, and if someone does contribute while others do not, the latter gain at the contributor’s expense. Even blaming others for not contributing makes no sense, because there can be no cooperation with those you regard as enemies. Ultimately, if no one invests, everyone simply remains “with what they had,” and no one loses—although in the case of avoiding mobilization, everyone does, in fact, lose. 

Consider another example—vaccination. Vaccines prevent the spread of infection when the vast majority of the population is vaccinated. In such cases, the unvaccinated minority (for example, those who cannot be vaccinated for medical reasons) also benefits from herd immunity. But if, as a result of the spread of unscientific anti-vaccination propaganda, people’s willingness to contribute to the public good declines, society as a whole loses—outbreaks of “forgotten” diseases can occur. Thus, vaccination shows the importance of social consensus. It is therefore no surprise that well-known anti-vaccine activists from the COVID era—such as Ostap Stakhiv—continued doing the same after the full-scale invasion: undermining public trust, now with a different aim—disrupting mobilization.

When society is cohesive, united, and oriented toward creating the common good, it becomes natural to expect that everyone will contribute or get vaccinated. And for the individual player, the question of whether to join in simply does not arise: of course they will.

Thus, for a public good game to resolve in favor of all players, there must be a certain context—shared norms and the social and psychological aspects[2] —in which players’ expectations naturally lead them toward cooperation. In other words, the focal point—the convergence of expectations—has to be cooperation. When Russia invaded Ukraine in 2022, the focal point for many men and women became going to the nearest enlistment office (some even left jobs abroad and returned to defend the country). The nation was in danger, and the external threat unified the group from within. Russia, however, mistakenly expected that the focal point for Ukrainians—the convergence of their interests—would be greeting Russian soldiers with flowers.

In game theory, it is always crucial to think impartially about the motives of other players and to factor those motives into one’s strategy. Before 2022, most Ukrainians—as well as most foreign analysts—believed that a full-scale invasion would be irrational for Russia, given the high and unpredictable external and internal risks, the difficulty of “selling” the war to its own population, and the substantial costs that would outweigh the minimal economic gains typical of modern warfare. But Branislav Slantchev, a political science professor at the University of California, argued that such a move was logical. As early as 2014, he wrote that because Putin’s regime rests not on elections, ideology, or economic performance but on its ability to use Russia’s military and political resources to achieve foreign-policy goals, Putin is compelled to act on the international stage in order to preserve his domestic legitimacy. As Slantchev later recalled, the only thing he had not expected was that it would take Putin eight years to launch a new bout of aggression.

Some choices may appear irrational when we do not know what interests, power dynamics, cultural context, or social expectations shaped them. Understanding what influenced a person—what situation they were in and what expectations guided their decision—opens the way to choosing strategies that lead to desirable outcomes. This socio-anthropological approach (which examines actual practice rather than abstract intelligent rational decision-makers[3]) and psychological-cognitive approach (how a person perceives a situation) lie at the heart of game theory: it yields far more meaningful results when we study people as they truly are, not as we might wish them to be[4]. 

Thus, game theory teaches us to anticipate players’ expectations, which are shaped by the current context—that is, to see the other side and to take its actions into account in order to achieve the desired result (to think strategically).

Consider another example. Sometimes hens prefer to lay their eggs not in the coop but somewhere outside, where they feel safer. You, however, prefer to collect all the eggs without having to search the yard for them. This situation can be modeled as a dynamic, repeated game in which you and the hen move in turns. If you spend time locating the hen’s hiding place and take all N eggs, the hen interprets this informational signal as “this place is unsafe” and goes looking for a new spot; next time, you will have to search again and spend more time finding it (and the hen’s constant relocation increases the risk of being caught by a fox or a marten). But if you take N–1 eggs—leaving one as a “marker”—the hen receives a different signal, “this place is safe,” and continues laying there. Game theory teaches us to analyze how the other player—in this case, the hen—will interpret our actions. So if we want the eggs and depend on the other side’s behavior, it is crucial to understand and take into account her perspective, even if she is a chicken.

Recognizing others as important actors who shape our shared situation is one of the core skills of strategic thinking.

Returning to the context of the Russian-Ukrainian war, we see that some men have chosen to hide at home because of the possibility of being mobilized. If we understand the factors they took into account when making this decision, we may be able to change their behavior. If service in the Armed Forces is perceived as a punishment, then efforts to shift that perception—such as brigade-level military marketing—may lead someone to voluntarily join a particular unit. And if the demotivating factor is the way commanders treat their soldiers, social psychologists, for example, could analyze existing group norms and organizational culture in the army, power structures and roles, and relationships within units, and develop interventions to improve the situation.

When developing one’s strategy, it is necessary to build in safeguards against undesirable strategies adopted by other players. Draft evasion creates both a supply of bribes and a demand for illicit “arrangements” with the institutions involved in sending people to war—recruitment centers, army units, doctors, clergy, and border guards. Such abuses arise when the two sides have opposing interests: on the one hand, Ukrainian society entrusts institutions with a public task (mobilization, assessing fitness for service, performing religious rites, guarding the border, and so on); on the other hand, individual representatives of these institutions may see an opportunity to obtain improper benefits. Abuse is more likely to occur when the payoff is easy to obtain—for example, when the likelihood that the police will open a bribery case is low.

What happens when the sides’ interests diverge sharply and there are no safeguards to align them? Consider the following example. Imagine you are a housewife in nineteenth-century America and want to get rid of flies in your household. You offer your butler and the children a penny for every fly they kill as motivation. You consider this fair, since they are doing it not because they share your concerns but because you are paying them. Before long, however, you realize that the number of flies in your life has multiplied: the children, working on commission, have hired neighborhood kids and set up a small fly-delivery business. Mark Twain described this very problem of his wife’s in 1885: “Clemens’s experience in this matter was a new one for her, but the governments of the world had tried it, and wept over it, and discarded it, every half-century since man was created. Any Government could have told her that the best way to increase wolves in America, rabbits in Australia, and snakes in India, is to pay a bounty on their scalps. Then every patriot goes to raising them.”

In this situation, Mrs. Clemens failed to take into account the divergence between her own interests and values and those of the people with whom she had made the arrangement. The children saw an opportunity for easy money, and since they neither cared about the presence of flies in the house nor shared the mistress’s concerns, they created a “Fly Trust.” They used her need for their own benefit—just as, in the earlier example, you use the hen’s inclination by leaving one egg. A readily available incentive offered to someone who does not share your aims and values quickly turns into a “perverse incentive.”

Such situations can arise under any circumstances where there is no impartial verification or oversight—this is why companies have supervisory boards and why academic work is defended before more experienced colleagues. There are many examples of perverse incentives. Some doctors, for instance, create fictitious patient visits in order to receive reimbursement from the National Health Service for services they never provided, thereby wasting public funds. Hence, there must be someone (perhaps an independent regulator) who verifies that the services were actually delivered. Another example: if a law-enforcement body can initiate cases with minimal effort and is evaluated not by court victories but by the number of cases opened and the media attention surrounding them, it is incentivized to launch weak cases that will fall apart in an honest court—that is, one that operates strictly within the law—or be upheld by a biased one, which is even worse. Therefore, incentives should be shifted from initiating cases to winning them.

As these examples show, the toolkit of game theory provides a systematic lens that can be used to address social problems. However, when examining such problems, it is essential to understand that players act within the context they find themselves in—a context that shapes their expectations and must be taken into account and, where possible, adjusted so that players act in the interest of society.