In class, we learned and evaluated many hypothetical examples of Game Theory. This theory evaluates how two groups may act when their are two different choices two different choice presented to them, and their outcome depends on how the decision the other group makes.
The two main examples of game theory are cooperative and non-cooperative. Cooperative game theory happen when the payoffs of the two decisions are know, so the firms cooperate, in order to achieve the best results for both. Since they cooperate, this also result the least amount of losses. The other type of game theory is non-cooperative game theory. That is where both groups are trying to achieve the best outcome for themselves, regardless of the outcome for the other group. In non-cooperative game theory, each group may have to be more cautious with their decision, in order to avoid the least favorable outcome.
Even though we only looked at hypothetical situations in class, there are real world examples as well for this theory. A real world example of non-cooperative game theory is the game we all have played probably hundreds of times: Rock-Paper-Scissors. In this game, there is a set of strategies each player can do, each of these strategies result in either a win, loss, or tie, with the other player depending on what they choose. Each player has the option of choosing rock, paper, or scissors. There is no strategy which will guarantee a player to win 100% of the time, so they have to take their chances with whatever they choose. Unlike the prisoner dilemma where there is a strategy that results in the least amount of loss, since each player is completely blind of the choice made by the other player in Rock-Paper-Scissors, there is still the 1/3 probability that a player may lose the game.
Subscribe to:
Post Comments (Atom)
Namibia's Economy
Namibia is a country that not many people think about. It is a small nation, right above South Africa, that bases most of its economy on to...
I think this is a great post that gives us an example of game theory that we may not have realized before and that we can all relate to. Another example of game theory in real life would be athletes using PEDs. When you use a PED you are in risk of being caught but you would be able to play at a higher level than other players. Therefore other players must decide whether it's worth the risk to take PEDs and face punishments or not take PEDs and play against others who have taken it leaving you at a disadvantage.
ReplyDelete