Application of Game Theory with Blockchain – Case Study

Published by Mario Oettler on

In this lesson, your task is to analyze a question and find an answer with game-theoretical tools. The question is:

Can an escrow related to physical goods be secure?


A fundamental example of the usage of cryptocurrencies is to buy goods. While the blockchain promises to eliminate the centralized payment intermediary, it doesn’t solve the trust issue between buyer and seller regarding the delivery of the actual goods. Let’s consider an example.

Suppose Alice orders a TV with Bob. Alice doesn’t want to pay for the TV until she has received it. And Bob doesn’t want to ship the TV until he receives the payment from Alice. The question is, can this deadlock be solved without involving a trusted third party?

Analyze this under the following assumptions:

  • Alice and Bob act simultaneously
  • Alice and Bob act sequentially
  • There is no punishment
  • There is a punishment