Answered: n business, sports, politics, and many…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In business, sports, politics, and many other fields there are probably countless situations akin to the prisoner's dilemma where players acting in their own self-interest do not produce an ideal outcome. Likewise, some player dynamics also illustrate other game theory concepts like a game of chicken, credible threats/commitments, and other similar concepts. Use at least one article from The Wall Street Journal to discuss a strategic situation between players that resembled or used any of the concepts above. What could have any of the players done differently to achieve a better outcome?

Definition Definition Economic decision-making framework that analyzes how different players optimize their outcomes with given pay-offs corresponding to their available strategies. The assumptions of game theory are: The number of players or competitors are finite/limited; All participants are rational The rules of the game are known to every player; and Each participant has a finite set of actions. A common way in which game theory is presented as an ( m x n ) matrix in which m represents the strategies of row player and n represents the strategies of column player. There are several limitations of game theory: Many businesses have a large number of competitors, and selecting an optimal strategy in these circumstances is difficult; Real-life business operating environments are full of uncertainty and difficult to model as a game theory; and The assumption of rationality and utility maximization isn't always an accurate portrayal of human nature.

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