Game theory can be terribly dry. Below is an exercise suitable for an introductory undergraduate course.
GAME THEORY AND STRATEGIES OF COMMITMENT:
MARIJUANA LEGALIZATION IN WASHINGTON STATE
Marijuana advocates in Washington State have developed an elaborate set of regulations designed to allow adults to get marijuana without legal risk and generate revenue to the state while at the same time limiting exports to other states, sales to minors, and tax evasion. The regulations require that each location where marijuana is to be produced, processed, or sold be individually licensed by the state.
That system might work reasonably well unless the federal government decided to interfere. Still, at best, there would still be more cannabis use than under prohibition.
If the federal government â€“ specifically the DEA â€“ did decide to interfere, the whole system could easily be shut down. Since all of the activity Washington State plans to regulate is against the federal law, DEA is strongly motivated to do that.
Completely unregulated marijuana dealing would be much worse, from the viewpoint of the advocates: more access for juveniles and no revenue for the state. It would also be worse from the perspective of DEA.
Now imagine this as a non-zero-sum, sequential-move game, where the marijuana advocates move first.
What is the advocatesâ€™ best play? And how should DEA respond?
Would DEA prefer to be able to make a commitment before the advocates move?