Assignment Nos. 12 Game Theory PDF

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Assignment Nos. 12 Game Theory

Please answer the following questions and submit on the deadline date. 1. What do you think is/are the importance of understanding the Game Theory by the economist/managers? How does they benefit in understanding this economic? Any time we have a situation with two or more players that has consequences, we can use what we call game theory to help identify what possible results there may be. To start of with the definitions of some terms which are frequently used in a game theory: Game: Any set of circumstances that has a result dependent on the actions of two or more decision-makers (players) Players: A strategic decision-maker within the context of the game Strategy: A complete plan of action a player will take given the set of circumstances that might arise within the game Payoff: The payout a player receives from arriving at a particular outcome (The payout can be in any quantifiable form, from dollars to utility.) Information set: The information available at a given point in the game (The term information set is most usually applied when the game has a sequential component.) Equilibrium: The point in a game where both players have made their decisions and an outcome is reached Game theory brought a change in economic problems. For instance, neoclassical economics struggled to know entrepreneurial anticipation and could not handle the imperfect competition. Game theory turned attention away from steady-state equilibrium toward the market process.

In business, game theory is needed for modeling competing behaviors between firms. Businesses usually have a few approaches that influence their ability to realize economic gain. For instance, businesses may face issues such as reducing current products or to come up new ones, lower prices contrary to the competition, or implement new marketing strategies. Economists generally use game theory to understand oligopoly firm behavior. It helps to predict likely outcomes when firms engage in certain behaviors, such as price-fixing and collusion.

2. Click the links on (1) Game Theory (2) Game Theory .List down and discuss your observation on the Concept of Nash equilibrium and Prisoner’s Dilemma on this video. Select one answer from question no. 2 and apply the concept you have learned on this video. Nash Equilibrium is an outcome reached that, once achieved, means no player can increase payoff by changing decisions independently. It can also be thought of as "no regrets," in the sense that once a decision is made, the player will have no regrets concerning decisions considering the consequences. The Nash Equilibrium is reached over time, in most cases. Generally, there can be more than one equilibrium in a game. The prisoner's dilemma is a paradox in decision analysis in which two individuals acting in their own self-interests do not produce the excellent outcome. The typical prisoner's dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result, both participants find themselves in a worse state than if they had cooperated with each other in the decisionmaking process. The prisoner's dilemma is one of the most well-known concepts in modern game theory....