Financial Daily from THE HINDU group of publications
Sunday, Feb 27, 2005
Financial Daily from THE HINDU group of publications Sunday, Feb 27, 2005 |
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Investment World
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Economics Columns - Simple Economics Quantum games B. Venkatesh
Scientists are now applying quantum physics to game theory! How? Take Prisonner's dilemma, a typical example in traditional game theory. This involves two prisoners charged with stealing. They are kept in two different cells. If one confesses, he is set free but the other suffers maximum imprisonment. If both tell the truth, they suffer sometime in the prison. But if both keep quiet, they undergo minimum sentence. Hence, it is best that both keep quiet. But if the prisoners do not trust each other, it is very likely that both will confess and end up serving sometime in the prison. Researchers claim that the prisoners can maximise their payoffs by applying two concepts in quantum physics called super position and entanglement. To understand these concepts, let us move to the stock market. You have been out shopping and do not know how the HDFC stock ended the day. In quantum physics, HDFC is said to be in "super position" — it is up and down at the same time! Of course, the moment you know how the stock closed, the super position collapses. The two states of the stock — up and down — are "entangled" because you cannot know one without affecting the other. If you know that the stock closed down, it would affect the state of the stock moving up. Now, suppose the two prisoners have quantum particles at their disposal. Because these particles are entangled, one "knows" what the other is doing through another concept called spin. So, both prisoners arrive at the best strategy. And if all this is very abstract, do not worry. Quantum physics is like that.
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