Game Theory And Its Effects On The Choices Of Economic Agents Production Outcomes

1295 Words Jul 20th, 2015 6 Pages
Game Theory Game Theory, the study of interacting between the choices of economic agents production outcomes with the respect to the preferences or utilities of other agents, where the outcomes in question might have been intended by none of the agents (Don Ross). There are a few basic elements of game theory, such as utility, games and rationality, trees and matrices, prison dilemma, interpreting payoffs: morality and efficiency in games, uncertainty and risk, beliefs and subjective probabilities as well as other variables. Game Theory requires very strong logical sense and have strong correlation to behaviorism, social psychology, and economics. First, the terminology “game” under the game theory is a description of a strategic situation (Game Theory). Since game theory is a study of economic agent and other elements, we shall describe an economic agent would be an entity with preferences. Game theorists are similar to economists and philosophers who studies rational decision-making, utility. This refers to some ranking, on some sort of specified scale, of the subjective welfare or change in subjective welfare that an agent derives from an object or an event. By ‘welfare’ we refer to some normative index of relative well-being, justified by reference to some background framework (Don Ross). As we can see utility is some sort of psychological fulfillment as well, it enhances the satisfaction. Therefore a utility function for a player is supposed to represent…

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