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Behavioral game theory seeks to examine how people's strategic decision-making behavior is shaped by social preferences, social utility and other psychological factors. [1] Behavioral game theory analyzes interactive strategic decisions and behavior using the methods of game theory, [2] experimental economics, and experimental psychology.
The prisoner's dilemma is a game theory thought experiment involving two rational agents, each of whom can either cooperate for mutual benefit or betray their partner ("defect") for individual gain. The dilemma arises from the fact that while defecting is rational for each agent, cooperation yields a higher payoff for each.
The El Farol bar problem is a problem in game theory.Every Thursday night, a fixed population want to go have fun at the El Farol Bar, unless it's too crowded. If less than 60% of the population go to the bar, they'll all have more fun than if they stayed home.
Another use of game theory in managerial economics is in analyzing pricing strategies. For example, firms may use game theory to determine the optimal pricing strategy based on how they expect their competitors to respond to their pricing decisions. Overall, game theory serves as a useful tool for analyzing strategic interactions and decision ...
"Thirteen critical points in contemporary economic theory". Journal of Economic Literature. 10 (4): 1163– 1189. JSTOR 2721542. Alessandro Innocenti (1995). "Oskar Morgenstern and the Heterodox Potentialities of the Application of Game Theory to Economics". Journal of the History of Economic Thought. 17 (2): 205– 227. doi:10.1017 ...
Constant sum: A game is a constant sum game if the sum of the payoffs to every player are the same for every single set of strategies. In these games, one player gains if and only if another player loses. A constant sum game can be converted into a zero sum game by subtracting a fixed value from all payoffs, leaving their relative order unchanged.
Theory of Games and Economic Behavior, published in 1944 [1] by Princeton University Press, is a book by mathematician John von Neumann and economist Oskar Morgenstern which is considered the groundbreaking text that created the interdisciplinary research field of game theory.
Game theory is one of the principal components of economic theory. It addresses the way individuals allocate scarce resources and how scarcity drives human interaction. [8] One of the most famous examples of game theory is the prisoner's dilemma. The classical prisoner's dilemma model consists of two players who are accused of a crime.
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