Game Theory and Financial Market Regulation

​In this problem I am looking at strategies for a game called What’s on Back?

The decisions or strategies one company chooses will likely motivate other competitors to respond. Using the game theory allows a company to assess and understand more about itself and its competitors so that it can adjust and shape the competition to maximize its win probability (Johnson, 2014). Some examples of how A&D companies apply the game theory in their decision making are:

The Prisoner’s Dilemma is an extremely popular game and way of thinking about social interactions and also economics. It judges how people work together and against each other. It helps us understand what governs the balance between cooperation and competition in business, in politics, and in social settings. The two players in the game can choose between two moves, either 'cooperate' or 'defect'. The idea is that each player gains when both cooperate, but if only one of them cooperates, the other one, who defects, will gain more. If both defect, both lose. The whole game situation and its different outcomes can be summarised with the example provided below, hypothetical situations are imagined with the example below

If you constantly split the difference or “straddle the fence,” game playing can result and the outcome could be less than ideal.

Life, like war, compares to the game of chess. There are two sides, and they take turn moving their pieces in play. There is always a strategy for the final goal, victory, or the game could end in a stalemate. An endless possibility of moves exists for each player, keeping in mind the possible future actions of the opponent. This makes the game complex and difficult because each player does not know the intent, or exact move of the opponent. Each player must rely on instinct and judgment of their opponent to estimate the next action of the opponent. One must also account for the losses of pieces and the sacrifices needed in order to achieve victory. A game of chess between the United States and Japan started in July

d) (2 pts.) Why do we see that the strategy that results is not the strategy that offers both players the best financial

In a one play game, with no dominant strategy, Delta has 3 Nash equilibrium options to choose from.

Example: Player 1 is the manager at my job, and she doesn’t feel good. She has two moves: either go to work, or take a sick day. If she comes in, she may spread whatever illness she has around. If she doesn’t go to work, she can have the chance to feel better. Player 2 is the boss, and now has two choices: to keep her on staff, or fire her.

The Australian financial system evolved in five stages. The first stage was the introduction of financial institutions during the early colonial period in the 19th Century, where the influence of British institutions was a key driving force. The end of that period was marked by the 1890s depression which saw a major rationalisation of Australia’s financial institutions. The start of the modern era of financial regulation can be traced back to the introduction of banking legislation in 1945 and the establishment of Australia’s first central bank.

In T.A. theory games always have a payoff, and are played to re-enforce the player’s life script. In the ‘yes but’ game the payoff for the instigator is the re-assurance he is right in his belief about others that no-one can help him and re-enforces his intrinsic belief about himself, that he is helpless.

Game theory cannot always predict reliable outcomes for real-life situations as it is more an

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

Nash equilibrium can be described as the end of the game sequence. Player gains a posteriori experience during the sequences of the game which in turn help them to form the belief and gain knowledge that lead to the end point, the Nash equilibrium, hence there is no further knowledge that can be gained. In the usual finite set of games the marking of the end point, Nash equilibrium, will allow us to make better or optimal decision. If our decision making process doesn’t satisfy the Nash equilibrium, we must always be able to improve our decision and choice that we made till we hit that equilibrium.

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

At the same time, the regulators should be as transparent as possible and fully accountable. The accountability and transparency of the regulator will increase the credibility of the regulator and in-turn benefit the regulated entity. Types of Financial Regulation Financial regulation in a country can be done either by a single body called a single regulator or multiple bodies co-existing and working together or in a hierarchy of entities known as multiple regulators. A regulator whether single or multiple does not determine the economic standing of a country or its financial strength. Many developed countries of the world follow either the system of single regulation or multiple regulations. Often in times of economic crisis or financial boom in the country’s economy the government of the nation will review its regulatory system and choose to expand or close down some of its regulatory bodies.