The Nash Equilibrium: A Study in the Futility of Striving for Healthcare Compliance
By Frank Cohen, Director of Business Analytics | June 3, 2015
As originally published by Racmonitor.com.
I’m not sure how many people paid attention to the sad news over Memorial Day weekend, but Dr. John Forbes Nash Jr., a brilliant mathematician, economist, and one of those few people who made substantial contributions to the way our society works, died in a tragic automobile accident on the New Jersey Turnpike. He and his wife were ejected from a taxi as it crashed attempting to pass another vehicle. You can Google “John Nash” and get all the background information you want, so I am not going to get into those details here. What I really wanted to discuss was how his work in game theory ultimately has proven to be invaluable in the healthcare field, particularly when it comes to complex decision modeling and of all things, compliance risk.
Dr. Nash was perhaps most famous for the Nash equilibrium, which occurs when all of the players in a given game know each other’s strategy to win and no individual player changes his or her strategy for personal gain. In essence, Dr. Nash showed that, in most iterative and non-iterative multi-player games, the optimal decision for any player is based on the strategies (or decisions) of the other players in the game.
Let’s take a simple example: that of rock-paper-scissors, a game commonly played by children (and of course, adults when they have a bit too much to drink!) In this game, each player hides a hand behind his or her back, and on the count of three (or something like that), produces a hand in one of three configurations. A closed fist represents a rock; holding the hand open and flat represents a piece of paper; and showing the index and middle finger represents a pair of scissors. In this game, paper covers rock (win), scissors cuts paper (win), and rock smashes scissors (win). So, if you show a rock and I show paper, you lose and I win. If you show a rock and I show scissors, you smash my scissors and you win and I lose. And so on and so on.
Read the full article on Racmonitor.com