Notion of Equilibrium in Game Theory Explained

According to professor Dixit, John Nash would be a rich man if he got a dollar for every time someone mentioned Nash’s equilibrium. Professor Dixit elucidates much on game theory and the impacts it has had on situations that human beings encounter on a daily basis. Game theory ventures much into studying decision-making with the outcome of each participant depends on the actions of everyone.

In game theory, when a player is choosing a move or a strategy, he or she must also consider the plans and choices that the others will make. This also happens with the rest because as you think about their choices, they are doing the same about yours hence the thinking cycle goes on.

This shows that indeed thinking about the motives of enemies and being aware of complex patterns do at times resist logical analysis. A lot of aspects of strategies and motivations can be studied and turned into science which is game theory.

Game theory took a head start in the 1920s with the work of John Von Neumann which is found in his book with Oscar Morgenstern. The two did a study on ‘zero-sum’ games looking at the interests of two players. With John Nash, he treated more general and realistic cases of a mixture of rivalry and common interests and any number of participants.

The theory entails a notion of equilibrium whereby complex chain thinking about thinking could unite. According to the method, the motives of all participants would be mutually consistent such that each would be selecting his or her most preferred response to the choices of others. This theory can only be useful if the equilibrium it posits is in existence. To prove the existence of the equilibrium, Nash used mathematical techniques in a general class of games.

Reference

https://www.pbs.org/wgbh/americanexperience/features/nash-game/

Game Theory Explained

Game theory is the study of mathematical models of negotiation, conflict and cooperation between individuals, organizations and governments. The study has direct applications in contract theory, economics, sociology and psychology.

Game theory is applied in various areas of study to understand why an individual makes a particular decision and how the decisions made by one individual affect others. The application of game theory concepts and techniques to non-game activities is known as gamification.

The Nash Equilibrium

The theory constructs a notion of “equilibrium,” to which the complex chain of thinking could converge. Nash used novel mathematical techniques to prove the existence of equilibrium in a very general class of games. This paved the way for applications. Biologists have even used the notion of Nash equilibrium to formulate the idea of evolutionary stability.

Game theory research involves studies of the interactions among people or groups of people. Because people make use of an ever-increasing number and variety of technologies to achieve desired ends, game theory can be directly applied in areas of negotiation, such as contract theory and indirectly applied in practical pursuits such as engineering, information technology and computer science.

So-called games can range from simple personal or small group encounters or problems to major confrontations between corporations or superpowers. One of the principal aims of game theory is to determine the optimum strategy for dealing with a given situation or confrontation. This can involve such goals as maximizing one’s gains, maximizing the probability that a specific goal can be reached, minimizing one’s risks or losses, or inflicting the greatest possible damage on adversaries.

Game theory was first devised by John Von Neumann. Later contributions were made by John Nash, A. W. Tucker, and others.

Reference: https://whatis.techtarget.com/definition/game-theory

Game Theory and Blockchain Key for a Better Banking Network

The banking system that is operating in the current society is very different from what used to be. Consumers are increasing their demand for services some of which these banks are unable to offer. Its services seem to have become highly inefficient and therefore, there is a need to power banks. This means that banks are supposed to widen their array of technology as well as their methods of interaction and transactions with consumers. This could only be done through innovation, where blockchain tech comes in as a savior. All these are being inspired by game theory.

All these mean that there is a great need to digitize the banking services. For instance, the modern banking where one can do transactions on phone without necessarily locating an ATM or the nearest branch has started the way, though it is not enough. There is a need to integrate Banking as a Service commonly referred to as BaaS with Blockchain technology. This model will help solve issues facing the financial world.

All these will be made possible by applying the Game Theory, The Prisoner’s Dilemma, and Blockchain. It will solve the problem of mistrust and lack of transparency in transactions. So integrating traditional banking and blockchain will make it stronger by making all transactions being recorded on a decentralized and highly accessible blockchain.

A fintech company called BANKEX is on a mission to integrate these two banking models. It is set to do it by developing its Proof of Asset Protocol which is a method of making assets possibly be digitized and logged on in the blockchain. It is also working to ensure market liquidity of these digitized assets is increased by making qualities of assets be verified by unbiased programming and recorded on the immutable blockchain.

Reference

https://www.forbes.com/sites/geraldfenech/2018/12/01/how-game-theory-and-blockchain-can-help-support-a-better-banking-network/

An Outline of Game Theory

When expounded; game theory has diverse applications. When it first got developed, its purpose was to solve economic problems. However, it has to solve a lot of issues in different fields that include politics, war, economics, and biology. The method got developed by a Hungarian-born American mathematician named Jon Von Neumann together with his colleague from Princeton and German-born American economist Oskar Morgenstern.

The two mathematicians saw that economics was like a game in which players anticipated each other’s moves. The two decided to evolve into a new kind of mathematics and named it the game theory. The theory has managed to overpower theories like probability which got previously used. The application does not rely on pure chance but rather focuses on decision making strategic aspects that the players’ control.

On famous and classical example of game theory is the prisoner’s dilemma. It involves two bank robbers that managed to escape the grasp of the authorities. However, the robbers make a mistake of using a stolen getaway vehicle. The police manage to track them down and capture them. The problem, however, is that the cops cannot link the robbers to the bank robbery. They decide to use manipulative tactics to get them to confess.

The two get separated and given the same offers. Should one surrender then confess and links the robbery to his partner, then they will walk free and the other gets a ten-year sentence. The second offer is that if they both confess, they get sentenced for seven years. The last offer is that if they both deny, then they will get a two-year sentence for the stolen car. It creates a dilemma between the wrong-doers.

References

https://www.britannica.com/science/game-theory

Application of Game Theory

Game theory takes on different forms in many fields. Each field uses the approach in its unique way to acquire the desired results. Some classifications categorize the applications of the theory in numerous platforms. Some include the famous Prisoners Dilemma, The Nash Equilibrium, Real World Dilemmas, and Mixing Moves.

One significant example is the “Prisoners Dilemma.” It categorizes two bank robbers that end up making a poor selection for stealing a get-a-way car. The police arrest them but do not have any evidence linking them to the bank robbery. The separate them and implement a strategy to coerce them into a confession.

The authorities give each prisoner alternatives following their actions. The first is to admit that their partner robbed the bank allowing them to walk scot free while their partner serves a ten-year sentence. The other option is that they both agree to the robbery and each helps for seven years. The last option is that they both deny the bank robbery, but get charged for stealing the car and serve for two years.

The law enforcement is putting the two robbers on the spot. There are several scenarios causing dilemmas. If one partner rats out the other and walks, he may have to face his angry friends or family. Moreover, the convicted can send a crew to take their share of the money and enact vengeance for the betrayal.

The police’s hopeful option is that they both rat each other. The detainees’ best case scenario is that they both deny the allegations and serve two years for car theft. The game theory in applications has different possible outcomes, but with a result of jail time.

References

http://www.cracked.com/blog/5-easy-ways-to-understand-game-theory-for-jerks/

Applications of Game Theory in Support of Intelligence Analysis

Intelligence analysts work by creating a problem and asking people to identify the unlikely and the likely consequences when an individual takes a choice of action for a particular real-time problem. With potentially critical outcome and limited time, analysts go through the unpredictable surrounding of the problem. They further give out a close measurement of what could happen, giving out more estimates on the particular issue. In every occurrence, working through logic to give a clue to whatever action should be taken to solve the epidermis. Keeping the intelligence assessment open is always very important. This is so because using the past to predict the future has sometimes proven unviable.

The intelligence analysis can sometimes be daunting. Every case comes with unique features and is fraught. The investigation analysis can sometimes be consequential as it might not tally with the analysis. The reasonable starting pace is expert knowledge for knowing a particular case. But problem experts and area ought not to be the means to analyze vital, technical problems. The expertise can be joined with reliance, rigorous, well-tested, analysis methods. These methods can provide an independent objective, they stimulate and create debate. This has been used by governments when making choices on matters of national security. The measure the risks of each action, weigh and see the better approach despite all of them being risky it is about effectiveness. Game theory determines how your next move will entirely affect the game. So intelligent analysis puts this in to use.

Reference

https://www.nap.edu/read/13062/chapter/6#64

Theory Approach To Understanding Genetics

A pair of researchers, Mishra and Steven Massey, has recently revealed how the Principles of game theory determine the genetic behavior. Their analysis opens a new window of possibility to fully understand the Biochemical processes through the use of signaling game theory involving sender and receiver interactions which both seek payoffs.

They argue that the view of genes as players in signaling game animates genes and bestows simple utilities hence unique personalities. He adds that the genome processes characteristics of a molecular society, complete with deception, imitation, cooperation, and completion, therefore, adding grandeur to the traditional view of life and all that constitute it.

They point out that although the signaling game theory initially took roots in economics and biology, it has firmly found its way to the design of smart contracts, privacy, cybersecurity among others.

In the analysis of Massey and Mishra, relying on existing research, tend to propose a novel view of biochemistry as a signaling game between genes and their associated macromolecules. And mathematically, it models the interaction between a sender and a receiver where the sender who has essential information signals the receiver to act accordingly. So the macromolecules signal their identity to other macromolecules that bind to them, which in turn undertake a biochemical reaction. It I the communication of identity which leads to certain human behaviors such as molecular deception which occur between the gene players.

Notably, the evolutionary transitions; which gives rise to today reforms are as a result of the evolution of signaling conventions between macromolecules, and the possibility of subversion by selfish pathogens. The occurrence of molecular deception has given rise to molecular sanctioning to control the defending behavior.

References:

https://www.sciencedaily.com/releases/2018/09/180904232303.htm

The Game Theory explained for Dummies

Game theory is the study of to get the best results from an activity which others are taking part in. simply put it is thinking about your opponent’s course of action before taking yours. However, you need to realize that they too are thinking about what you are thinking about them.

It might seem impossible to uncover this mystery but some aspects can be unearthed using the game theory. Below are some of the basics that can help you understand this theory.

Prisoner’s dilemma

It involves arresting of two suspects who have just robbed a bank but the police don’t have sufficient evidence that they did so. If suspect A finks on suspect B and he or she remain quiet, then suspect A is handed a good deal while suspect B is sentenced harshly by the court and vice versa. If both fink on each other, they get an equal sentencing.

This can be seen in real-life scenarios where companies undercut each other instead of offering their services and products at a certain price. This causes both to lower their prices which is a benefit to the consumer.

Mixing moves

In a football game, a penalty kicker who shoots the ball towards a goalkeeper will fail miserably since the keeper anticipates the direction the ball will go. To avoid this a mixture of movements is paramount to achieve unpredictability.

Commitments

This is played out in situations that need commitments. For example, members of the labor union usually send representatives into meeting with firm final offers. This ensures that they will not accept any offer that falls short of their expectations. This move has been used in diplomacy and war to come to a desirable goal.

Sources:

The Assumptions of Game Theory Explained

Some terms only make sense when used with specific concepts. On the other hand, there are others which can be used in more than one field. One of the latter is game theory. However, this concept has nothing to do with games.

In a nutshell, Game theory is the study of how rational people relate to each other and make decisions. This concept is considered quite young considering it was introduced in the 1950’s by Josh Von Neumann and Oskar Morgenstern.

It is an interdisciplinary concept is applied in various fields. Most notably, it has been used in economics and political science. There are different versions of the game theory, but among them, cooperative and non-cooperative types are the most common. Probably because people are always competing for something, and in this case, their decision they make will depend on what they think will benefit them the most.

This theory like most theories is based on some assumptions, and these assumptions contribute to both its strengths and weaknesses. One of the most significant assumptions is that the parties involved can use numerous strategies to solve the problem at hand. Therefore, there are multiple possible outcomes. The use of mathematical probability comes in handy at this point.

A second assumption is the players in the ‘game’ know the rules understand them and will play by them. This assumption is a dangerous one because humans are not always predictable. Assumedly, this can be tied with another assumption that people will make the decisions that can work best in their favor.

However, even rational people will make a decision, now and then, that does not always put them at an advantage. This is inevitable, at least among we humans.

References

https://www.investopedia.com/terms/g/gametheory.asp

http://www.economicsdiscussion.net/game-theory/game-theory-assumptions-and-structure-of-game-theory/3797

Good Neighbors

“Do unto others as you would have them do unto you.”

“All things whatsoever ye would that men should do to you, do ye even so to them.”

In game theory’s pd, everyone ends up with a worse outcome if you opt for something that’s best for you as an individual. But one way to escape this is to change the players’ motivations so that they want to help each other rather than go against.

For example, picture a nice park with green grass and a cool breeze. Now picture that park with a bunch of picknickers littering. Or in a nice neighborhood brunch cafe where customers fail to bus their own trays, cups, and plates. If a cafe employee or the good ol’ neighborhood association were to put up signs/posters saying “Do not litter” or “Please bus your own trays,” it would change the outcome.

By simply empahsizing how good neighbors throw out their trash or bus your own trays with such posters could motivate people to start cleaning up after themselves in order feel or show themselves to be “good people” – and because they want to avoid being thought of as “bad people”. As long as these new feelings are strong enough to persuade people to clean up or bus their own trays, people will feel good about themselves and each other for behaving well.