Essays on Nash Equilibrium

Question1

Some of the most important concepts from the first few pages of Nash’s 1950 paper describe the following: The sets in the Nash combination only overlaps once and in that particular outcome. The next concept is that for the outcome to stabilize, it must be the best for each member, meaning that each should give their best move expecting the best results and outcome. All the strategies in the game that give each player the same chances of winning is the equilibrium point. It must give a mutual chance for each player to win and have an advantage ...

Part A: Multiple Choice Questions:

The seller must have market power, that is the seller must have some control over price The seller must be able to identify different customer groups with different demand elasticities The seller must be able to prevent arbitrage between the two groups All of the above You’ve just decided to add a new line to your manufacturing plant. Compute the expected loss/profit from the line addition if you estimate the following:

There is a 70% chance that profits will increase by $100,000.

There is a 20% chance that profits will remain the same. There is a 10% chance that profits will decrease by $15,000. Loss of $15,000 ...

Every game theory model includes players, strategies and payoffs. The players are the decision makers whose behavior we are trying to explain and predict. Strategies are the potential choices to change prices. The pay- off is the outcome or consequence of each strategy. A zero sum game is the one in which the gain of one player comes at the expense and is exactly equal to the loss of the other player. The Nash equilibrium is a situation in which each player chooses an optimal strategy given the strategy chosen by the other player. In this game where there ...

Bargaining over Strategies of Non-Cooperative Games

The article provides insight to the bargaining process that integrates the process of non-corporative game theory. To understand the applicability of non-cooperative games, the authors discuss the uniqueness, the efficiency, and existence of the agreement reached in the bargaining process. The article shed light to the broad perspective of the non-cooperative games involving two players by including several games that involve the Ultimatum Game, the Prisoner's Dilemma, the Trust Game, the Hawk-Dove Game. Using these two-player non-cooperative games, the author found that the bargaining process proposed result in Pareto-efficient settlements, which typically differed from the Nash equilibrium obtained in ...

Introduction

The Game Theory is used in experimental economics, though it can be used in a number of other social sciences. There are a number of critics that argue this theory cannot hold up since not all people present in the market economy are perfectly rational. However, there are ways to rule certain margins out. There is room for error in the experiments mentioned below. Certain studies even go into finding differences when it comes to the present data and the predicted outcome. There are ways to analyze why certain outcomes deviated from the expected results. This type of theory will help ...