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

Taxation, effects and implication of taxation in relation to managerial eco...

effects and implication of taxation in relation to managerial economics

Indifference curve, Case study for consumer behavior using indifference cur...

Case study for consumer behavior using indifference curev

Opportunity costs, When Burton Cummings graduated with honors from the Cana...

When Burton Cummings graduated with honors from the Canadian Trucking Academy, his father gave him a $350,000 tractor-trailer rig. Recently, Burton was boasting to some fellow truc

Actual income and full employment income, Actual income and Full employment...

Actual income and Full employment income Full employment income (Also called Potential National) is the national income that could be produced when the country's factors of pr

Nature of demand curves and elasticity, Usually, elasticity of a demand cur...

Usually, elasticity of a demand curve throughout its length isn't the same (Fig. below). It varies between 0 and ∞, or in other words, 0 ≤ e p ≥ ∞ In some cases, though, the

Movements along supply curve, Movements along the supply curve Movemen...

Movements along the supply curve Movements along the supply curve are brought about by changes in the price of the commodity. When price increases from P1 to P2, quant

Advantages of the mixed economy, Advantages of the Mixed Economy Neces...

Advantages of the Mixed Economy Necessary services are provided in a true market economy, services which were not able to make profit would not be provided. Incentive:  Sin

Demand and supply, The demand for good X is estimated to be:  where p x p...

The demand for good X is estimated to be:  where p x price of X in dollars M = personal disposable income in trillions of dollars per year P y = price of a competitive in do

Decision tree analysis, I. A farmer – businessman is in a quandary as to wh...

I. A farmer – businessman is in a quandary as to what crop to plant in his land. He has the option to plant Crop A, Crop B, or Crop C. f the weather turns out to be good and the

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