Game Theory for Applied Economists - Essay Example

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The paper “Game Theory for Applied Economists” will discuss game theory as one of the most famous theories in the modern era. This fact makes this theory very important from the point of view of significance. It is a very formal study of conflicts and the cooperation…
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Game Theory for Applied Economists
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Download file to see previous pages This is very helpful in the formulation of the necessary strategies of the business. EXAMPLES OF GAME THEORY-EARLY CONTEXT AND DEVELOPMENT One of the earliest examples of game theory can be seen in the studies of Antoine Cournot in the year 1838. It studied the example of duopoly in the context of a formal type of game and theoretical analysis. The formal theory for the games was brought into the forefront by the mathematician Emile Borel, who had the suggestion of a formal theory of the games by the year 1921.It, was further developed by the likes of mathematicians like John von Neumann in the year 1928. The field of game theory was established as an entity in its own right after the publishing of seminal book called as Theory of Games and Economic Behavior by the likes of Vo Neumann and the economist known as Oskar Morgenstern (Binmore 114). It also received a lot of fillip from the studies of mathematician John Nash who demonstrated that the finite games have any equilibrium, wherein all the players choose the option that is best for them keeping in mind the action of the fellow players. This is a fundamental unit of the design element that can be seen from the studies of these individuals. This concept of non-cooperative game theory was broadened by the application in the year 1950 and 1960’s. t has always been a central point for discussion. It has been applied to the areas of politics and war. This is one of the centralized concepts of this theory. It has also been accepted in the fields of sociology and physiology. It is also seen in the field of biology. These are some of the common points of the relationship that find mention in the development of theories. It received a lot of attention with the awarding of the Nobel Prize in the field of economics to the likes of Nash, John Harsanyi, and Reinhard Selten. At the period of 1990, it was seen that the game theory was being increasingly used in a number of the fields. It is being prominently used in for the designing of auctions. It is being designed in such a manner that there is the distribution of maximum benefits for the population. It has also developed a level of understanding in terms of the number of the division of electromagnetic spectrum to the telecommunication firms. The usage of this theory has helped in raising billions of dollars in a number of governments. GAME THEORY AND INFORMATION SYSTEMS The level of internal consistency and the basis of mathematics make it one of the primary tools of the modeling and design of many of automated processes of decision making as a part of interactive environments (Fudenberg and Tirole 173). As for example, one of the examples was setting up of efficient rules for the bidding process, websites, and the generation of tamper proof negotiation that is useful in the purchase of communication bandwidth. The automation of strategic choices is necessary for making the choices to be robust in nature. This is helpful in the avoidance of any kind of manipulation in the process of bidding and guards against any kind of abuse form any of the users. The strength of game theory comes from the process of structuring the problems in a way that all the options become clear. ...Download file to see next pagesRead More
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