Equilibrium Is Virtually Useless : An Argument Between The Conceptuality And The Practicality Of Nash Equilibrium

1. The first chapter in the book is about the market and its inner workings. The book briefly explains the idea of supply and demand, in which the price of a certain good or service will reach the point where all the demand is equivalent to the supply. However, the value of something is not determined by its necessity, but its desire within society, as seen by the difference in cost between a diamond and life giving water. Markets operate as they do because people try to maximize the amount of utility for themselves. Nevertheless, a strict rationalism model cannot be used for predicting all the occurrences of a market because of the ever changing behavior of people; thus economists must take precautions against

1. “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess (H.3)”

Economists that believe in the rational economic model claim that they deal with people in the real world, not in a lab. Rationalist believe that we are driven by our self-interest. Edgeworth a philosopher and political economist said “the first principle of Economics is that every agent is actuated only by self-interest” (Sen, pg. 317–344). The rationalist claim that it is okay for people to go against their financial interest as long most people base their decisions rationally most of the time. However, the rationalist economic model assumes that people calculate the advantages and disadvantages before making a decision. In the film Harvard Business Reviewer Justin Fox stated “Basically, you build the models assuming people were like these calculators who would look at the range of possible outcomes and the risks and balance it all out.” (Mind Over Money, 2010). The fact is we not always look at the risk and outcomes when it comes to spending

In a real sense, it cannot give a correct strategy that can be taken by the competitor because a competitor is flexible to change their decision any time depending on the goals intended. It also does not explain the reasons behind opting for a certain strategy (Li & Yu, 2016).

Games can be very hard. States can be only observes to a certain extend. Multiple agents choose Actions, stochastic pays off and state transition depends on state and other

The third principle of individual economic decision-making relates to marginal decision-making. Rational people will think at the marginal level, making small changes or tweaks in their plans to achieve the desired objective. Rational people normally have a certain system or method he/she uses to achieve their objective and they understand that sometimes small changes must be made to accomplish this.

The key distinction between SPNE and a Nash equilibrium is place in the game. The idea behind SPNE is that decisions must be optimal for every node of the game. Nash equilibrium does not require solving for every decision node, but only those along the equilibrium path. For there to be a SPNE, each node must be Nash equilibrium. Not every Nash equilibrium is SPNE, but every SPNE is a Nash equilibrium.

Economists have often modelled human decision makers as completely rational. According to this model, rational people know their own preferences, gather and accurately process all relevant information, and then make rational choices that advance their own interests. However, Herbert Simon won a Nobel Prize in economics by pointing out that people are rational, but only boundedly so in that they seldom gather all available information, they often do not accurately process the information

The three chapters that we studied this week highlighted many important principles in the study of Economics. One of those concepts is the

Two researches were conducted by both Weigel and Bonica, The Macroeconomics Game: Trade or Raid and The Healthy Policy Game: Vote,

Some people, like myself, need practical models in order to understand certain concepts and theories. In our text book The Economy Today it completely ignores the intrinsic value of business decisions because you can’t put a numeric value on it. The game Monopoly™ is all about the numbers. In the game of Monopoly™ you have goals: The object is to bankrupt all opponents. To do so, you must be dedicated and make each decision with the aim of improving your chances and wiping out your opponents.” (Monopoly) In what I will call throughout the paper real life, the goal is the same. Look at the excerpt from an ABC New article called The

Inference and supposition define a great deal of the untraceable origins of game theory. Disjoint and disconnected contributions characterize game theory, yet somehow culminate in a well-defined field of applied mathematics. Some believe the Talmud, the central text of Rabbinic Judaism, beginning in the first millennium predicts modern game theory through its treatment of inheritance division (Open Option 1). Yet, if one observes close enough, commentators throughout ancient history reveal game-theoretic insight; for example, Plato’s texts Laches and the Symposium and Socrates’ Battle of Delium, a soldier’s dilemma on the battlefront. Amid countless historical military decisions, leaders unconsciously used game-theoretic logic, similar to the

Nash equilibrium is a solution theory of a non-cooperative game which involves two or more

The Pareto Principle applies to a variety of economic and business situations and states that roughly 80% of the outputs are directly attributable to only 20% of the inputs. This concept is also frequently referred to as the "80/20 Principle" or the "Law of the Vital Few."

Game Theory, the analysis of the concepts used in social reasoning when dealing with situations of conflict (Rubinstein, 1991), is one of many methods used to provide rational strategies towards the making of decisions. Game theory provides logical and mathematical models towards decision-making which are applied to real-life situations such as