(1) Externalities are handled in the game theory literature
(2) Preference definitions are not in scope for most game theory lit; what you're describing are preferences and expected utility, which ARE in the literature and metamodel
(3) This is not really true. It depends on how big you are and how big your coalition is. Consider that Saddam Hussain is no longer in charge of Iraq.
(4) Yes, potential outcomes are considered under game theory.
I get your point that OP's statement feels reductionist, but I wanted to explain that the OP is actually correct.
> If each side really knew the true strength of the other side, it would be clear which would win and therefore actual war is illogical and unnecessary.
No, knowing the true strength is insufficient. I laid out other kinds of pieces of information that also influence the war being logical and necessary as well as the war being illogical and unnecessary and still happening.
Now, you could strengthen the argument and say "what OP meant was that if we had all the information needed to build a model to accurately predict the exact outcome to a high degree of confidence". To me that's the same as the "god of the gaps" argument though because at the most reduced state you end up with the classical position of "well, if I had the state of every particle in the universe I could predict what would happen". The simulation aspect is physically impossible as far as we know according to [1] because the amount of compute needed would be the universe itself. So now you have to start building a model that trades off error and complexity so that you could actually make a decision before the heat death of the universe.
LOL, no, but, reading the research of that period, it would have been fun!
Bell labs in the 1970s and 1980s as well.
It's not totally useless; the game theory framework is still helpful if you define your expected ROI (and your competitors). It is decision and strategy under uncertainty, of course, but its still a useful decision approach.
(2) Preference definitions are not in scope for most game theory lit; what you're describing are preferences and expected utility, which ARE in the literature and metamodel
(3) This is not really true. It depends on how big you are and how big your coalition is. Consider that Saddam Hussain is no longer in charge of Iraq.
(4) Yes, potential outcomes are considered under game theory.
I get your point that OP's statement feels reductionist, but I wanted to explain that the OP is actually correct.