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

Theory of multiplier, income generation process through investment multipli...

income generation process through investment multiplier

What do you mean by kinked isoquant, Q. What do you mean by Kinked Isoquant...

Q. What do you mean by Kinked Isoquant? This isoquant presumes only limited substitutability of labour andcapital. There are just a few processes for generating any one commodi

Equilibrium quantity, Consider an industry with a sole producer, a monopoli...

Consider an industry with a sole producer, a monopolist. The latter faces cost function C(Q)= Q/2 and aggregate (inverse) demand P(Q)=1 - Q (zero for Q> 1). Illustrate all your ans

Direct action, Direct Action Direct action in more than one from has be...

Direct Action Direct action in more than one from has been employed by the central banks either as an alternative to their discount rate policy or open market operations or tog

Costs for producing clealung, You own a pharmaceutical company that is spec...

You own a pharmaceutical company that is specialized in the manufacture of medicine for smokers. You newly patented an innovative drug called Clealung, which drastically reduces th

Oligopoly, pricing under oligopoly

pricing under oligopoly

Enumerate the scope of managerial economics, Enumerate the Scope of manager...

Enumerate the Scope of managerial economics The scope of managerial economics contains following subjects:  1. The Theory of demand 2. The Theory of production 3. The

Methods of demand forecast, No demand forecasting method is 100% accurate. ...

No demand forecasting method is 100% accurate. Collective forecasts develop precision and reduce the probability of huge mistakes.  Methods which relay on Qualitative Assessmen

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