Explain the game theory, Managerial Economics

Assignment Help:

Q. Explain the Game theory?

Game theory:  Game theory is a branch of applied mathematics which is used in the social sciences, most particularly in economics, as well as in biology (specifically evolutionary biology and ecology), political science, engineering, international relations, computer science and philosophy. Game theory tries at mathematically capturing behaviour in strategic situations or games in that an individual's success in making choices relies on the choices of others. Whereas initially developed to analyse competitions in that one individual does better at another's expense (zero sum games), it has been expanded to treat a wide class of interactions, that are classified according to numerous criteria.

Today, "game theory is a sort of umbrella or 'unified field' theory for rational side of Social science, where 'social' is interpreted broadly, to include human as well as non-Human players (computers, animals, plants)" (Aumann 1987).

Traditional applications of game theory aim at finding equilibrium in these games. In equilibrium, every player of the game has adopted a strategy which they are unlikely to change. Many equilibrium concepts have been developed (most famously Nash equilibrium) in an endeavour to capture this idea. These equilibrium concepts are differently motivated contingent on the field of application, though they frequently coincide oroverlap. This methodology isn't without criticism and debates continue over the appropriateness of particular equilibrium concepts, appropriateness of equilibrium altogether and usefulness of mathematical models more commonly.

Though some developments took place before it, the field of game theory came into being with Émile Borel's researches in his 1938 book Applications aux Jeux des Hazard and was followed by the 1944 book Theory of Games and Economic Behaviour by John von Neumann and Oskar Morgenstern. This theory was developed extensively in 1950s by many scholars. Game theory was afterwards explicitly applied to biology in the 1970s, though similar developments go back at least as far as the 1930s. Game theory has been widely recognised as a significant tool in many fields. Eight game theorists have won the Nobel Memorial Prize in Economic Sciences and John Maynard Smith was awarded the Crafoord Prize for his application of game theory to biology.

The games studied in game theory are well-defined mathematical objects. A game consists of a set of players, a set of moves (or strategies) available to those players and a specification of payoffs for each combination of strategies. Most cooperative games are presented in the characteristic function form, while the extensive and the normal forms are used to define non-cooperative games.


Related Discussions:- Explain the game theory

Maximizing profit in firm, how does knowledge of economics help in maximizi...

how does knowledge of economics help in maximizing profit in firm

Economic theories, Topic:  Company Case Study and Industry Analysis   ...

Topic:  Company Case Study and Industry Analysis   Instruction:  1) choose a company;                     2) recognize the market industry type;                     3)

What is the equilibrium in the labor market, What is the equilibrium in the...

What is the equilibrium in the labor market? Explain briefly. Equilibrium in the Labor Market a. The market labor of demand curve is the horizontal total of the individual l

Dominant strategy, In a one-shot game, if you advertise and your rival adve...

In a one-shot game, if you advertise and your rival advertises, you will each earn RM5 million in profits.  If neither of you advertises, your rival will make RM4 million and you w

Oligopoly, Explain the classification of oligopoly?

Explain the classification of oligopoly?

What is the socially optimal market price, Consider a manufactured good who...

Consider a manufactured good whose production process generates pollution. The annual demand for the good is given by Qd=100-3P. The annual market supply is given by Qs=P. In both

Full-service department, Like supermarkets, full-service department stores ...

Like supermarkets, full-service department stores like Macy's are mainly in decline. What factors may these types of stores have in common behind their declines? How would you veri

Cost, classification of costs

classification of costs

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd