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Game theory is a concept that entails formal study of cooperation, conflict and actions taken up by several interdependent agents. Game theory as a concept lays down the structure that facilitates through analysis an understanding of the strategic choices agents adopt[footnoteRef:1]. The earliest conceptualization of game theory is by Cournot in 1838 where the analysis sought to clarify choices and actions taken in a duopolistic market [footnoteRef:2]. Over the years, exploration of the game theory incorporates market equilibrium entailing economic social and political decisions. As a decision making tool, game theory involves the application of mathematical concepts to analyze strategic choices and problems. The decision making process allows enumeration of the players strategic options considering preferences and responses[footnoteRef:3]. [1: Gibbons, and Robert. Game Theory for Applied Economists. Princeton, NJ.: Princeton University Press, 1992. Gibbons, and Robert. Game Theory for Applied Economists. Princeton, NJ.: Princeton University Press, 1992.] [2: Rasmusen, and Eric. Games and Information: An Introduction to Game Theory, 3rd Ed. . Oxford: Blackwell, 2001] [3: Ibid 1] This is where an object is put up for sale with potential buyers declaring willingness until there is only one bidder left. This presents a simple game decision strategy. There is a complicated decision strategy in auctions where willing buyers submit bids for an item privately. Once all bids are received, the auctioneer awards the product to the high bidder at the second highest price. In this situation, the optimal decision strategy for the bidders is to provide their actual value for the item as their bid. This strategy is the weak dominant strategy since it is the one likely to yield optimal gain to the players whether or not the win the bid.
The optimal option for the bidders in the second price auction is to give one's own value for the item. This is so since if one bid lower than their worth for their item and win the action they will pay the second highest bid. In this case, they have optimal outcome although there is a probability that the item will go to someone else at a price lower than their valuation. Alternatively,…
Bibliography
Gibbons, and Robert. Game Theory for Applied Economists. Princeton, NJ.: Princeton University Press, 1992.
Rasmusen, and Eric. Games and Information: An Introduction to Game Theory, 3rd Ed. . Oxford: Blackwell, 2001.
Applying game theory to businessesDiscussion 3I appreciate your insight into game theory concepts and how player dynamics within the sports team play an important role in developing an ideal outcome. You bring up the crucial points on how people attempt to cheat the system and reward it. Players in different games tend to choose whether to trust each other without knowing the other players. Decisions made during the game theory
They also will exacerbate the deficit and could compromise the economy. There is disagreement over which policy prescription is going to be more likely to damage the economy. The health of the U.S. economy, however, is subject to a lot of variables, and one's own economic situation is only somewhat affected by the state of the U.S. economy. Still, the voter wants to vote in a way that increases
In actuality, the competition became quite stiff between various sales staff as it was the sales leaders in each category that were to receive bonuses, rather then incentives being given to all staff that reached certain targets. This meant that it was in each sales person's best individual interests to hinder sales from others and compete for certain specific sales. The ultimate result was a more embittered workforce and a
So-called n-person games include more than two actors or sides….The central problem is that the rational decision for an individual actor such as a state may be to 'defect' and go it alone as opposed to taking a chance on collaboration with another state actor" as did Israel and the ascent of the Likud after Arafat's refusal of the 2000 peace deal (Beavis 2010). Yet saber-rattling no longer seems
The absence of a dominant strategy allows for the existence of a point where each player takes up a strategy that maximizes his or her outcome given the other player's options. This is what is known as the Nash equilibrium. At this point, the players take up their own individual choices and cannot improve their outcome given that the prevailing circumstances. Satisfaction of the Nash equilibrium follows from rational
c) Mutual Interdependence: This assumption is based on the relationship between two or more individuals where one person depends upon the other for economic interest or benefit. When making a decision one has to consider the effect of his or her decision to the partner. This is common in the Perfect competition -- pure market phenomenon. With the assumptions above the game theory helps in developing a perfect competition among the