GAME THEORY

Games for Business and Economy

Games for Business and Economy

Economists have developed various game theories for business and economy. Different theories and games could be used according to the situation prevailing in the market. It depends on the type of market in which one is operating. These markets could include a perfectly competitive market, monopolistic competition and oligopolistic market.

Market Entry, Starting a Business and Game Theory

Anderson and Engers had worked on the game theory. They developed Nash Equilibria for monotone-n-player symmetric games. In this game, each player has a choice to participate in the game or not. These games include coordination games, market entry games and the bar- room games. If the participant's, payoffs are decreasing than there must be excessive participation in the game, while if the payoffs are increasing than the payoffs are increasing. There could be much equilibrium when the payoffs are decreasing.

Amir and Bloch had investigated the effects of game theory in a market with buyers and sellers. The increase in number of buyers increases the equilibrium price of the good, if it is a normal good (Kolokol & Malafeyev, 2010, pp. 44-50). When the economy is replicated, customariness of both goods and gross substitutes secures that the equilibrium of the strategic market game converges monotonically (in quantities) to the competitive equilibrium (Simon P. Anderson and Maxim Engers, 2007, pp. 120-37).

In the game theory, when participants have an option to enter the market, they may enter the market or opt to stay away from entering the market. John Duffy and Hopkins carried out a study on the relationship between the market entry and the game theory. The study is based to learn aspects of learning behavior in market entry games. The study found out that successful entry in the market requires effort and practice and repetition. In all the sessions conducted, play was at or close to the pure equilibrium result predicted by the reinforcement and fictitious play learning models. The aim of the study was to learn if the long—run predictions of learning models help to explain behavior in the market entry game. It requires a number of repetitions before the play of the experimental subject enter in to the game approaching asymptotic predictions of leaning models. It is also very significant to conduct experiments in order to be successful in the game. These experiments must be conducted only for a short time period.

Our design also helped us to investigate subjects' use of information. Researchers found that when individuals have information about the reinforcement learning models even they do not know what game they are playing, they are still capable of learning equilibrium behavior. Moreover, individuals do not witness a change in their behavior when more information is available to individuals. Fictitious play does not get a qualitative difference in play between the aggregate and full information treatment (John Hopkins Duffy, 2005, pp. 31-62).

The differences between the two are due to repetition strategies that do not capture the learning models ...