Game Theory – Descriptive, Normative or Prescriptive

Going through life we often are surprised by the different ways how people think, make decisions and interact. We believe that most of us are rational human beans (to some extent) and, therefore, our decisions should be grounded in analysis of the situation, our experience and intuition. Therefore, the human mind can be seen as an incredibly complicated machine that runs series of theoretical simulations of possible situations (often subconsciously) to find the most optimal course of action, taking into consideration the possible strategies of others. When the decisions are important to us and the reasoning process is conscious, we engage in strategic thinking. It has always been tempting to develop a theory that would actually explain and predict the…

Game Theory

Game theory happens to be a branch of applied mathematics which is used in social science. Its main objective is to capture behaviors but in this case mathematically in strategic situations where the success of an individual in choice making is largely dependent on the choices that are made by other people. This is the base or the main theme that underlies in the game theory. This is the same theme that is supposed to be articulated in this article. The author ignores the fact that game theory come in different types and only expresses one type of game theory specifically zero sum and non zero sum game theory. He concentrates only on this type of game theory leaves the…

Game theory application for lowest price guarantee

The game theory is applicable to a host of issues especially in economics. The theory is applicable where there is a multiplicity of decision makers and each player’s action affects or is affected by what the other party does. To cite a specific example, it is worthy examining how firms make production decisions relating to quality, quantity, pricing, etc. the game theory is equally useful in auctions, contract negotiations, and in voting exercises. Literature review Price setting is a difficult task as there is a multiplicity of players in each business or industry. This is furthered by the fact that each player intends to make the best out of every situation. However, decisions are always taken while accounting for what…

Game Theory

Game theory emerged as a scholarly field of study in the first half of the 20th century. Since that time, it has significantly affected various academic disciplines, such as economics, political science and biology. Although the term “game theory” may suggest a certain frivolity, the concepts underlying it have many real-world applications and offer a structured and logical method of considering strategic situations. The parallels between competitive games and strategic business situations should be fairly obvious. Consider the game of chess. There are two players, each of whom makes moves in sequence. After observing the move made by the first player, the second player makes a counter move. Then the first player, having observed the first two moves, makes the…

Outline and illustrate two ways in which an action may be both self-interested and altruistic

Another way in which and action can be both altruistic and self interested is aided by the concept that altruism may lead others to think more highly of you, which is in beneficial for you and makes you feel better about yourself, so is therefore also in your self interest. An example of this is giving to charity. This may give you positive feelings as you enjoy helping others and seeing that your own actions can benefit people other than yourself. Therefore you’re being altruistic and still acting in your self interest. This then illustrates that being altruistic coincides with your self interest as you get positive outcomes by helping others. Another way in which and action can be both…