In this assignment, you will apply game theory to a real-world situation and analyze how it would affect a company’s decision to enter a new market. You will consider how the decision will influence the company’s profit and stock price, and will create a model to evaluate the company’s decision.
Game theory assignment
Students studying microeconomics get introduced to game theory. Did you know that it’s amongst the preliminary microeconomics topics? Game theory in Economics is relevant. It involves strategies and offers an understanding of strategy making. Game theory is an interesting topic for students keen on working for multi-national conglomerates. The reason is that a significant part of decision-making is accomplished by game theory. Students can get many a game theory assignment. An online game theory homework help provider can help them.
So, we know the answer to what is game theory in economics. The critical point is that diverse types of games aid in analyzing various types of game theory problems.
The diverse types of games
Cooperative & Non-Cooperative Games – What are Cooperative games? Here players are influenced to take up a precise strategy through discussions and arrangements among players.
Non-cooperative games denote games where players choose their strategy to capitalize on their profit.
Normal and Extensive Form Games – The description of Normal form games is as a matrix. So, game payoff and strategies come in a tabular form.
However, the description of extensive-form games is as a decision tree. In the tree-like structure, the player names are symbolized on diverse nodes. Moreover, the realistic actions and payoffs of all players are given.
Simultaneous and Sequential Move Games – In simultaneous games, two players adopt strategies simultaneously. Players are unaware of the move of different players.
Nevertheless, in sequential games, players know the moves of players who’ve taken up a strategy.
Simultaneous games have a normal form, and sequential games have an extensive form.
Then there are:
- Constant Sum and zero Sum games
- Symmetric and Asymmetric games
Choose an example of a social dilemma, and illustrate this with non-cooperative game theory.
Some game theory assignment examples
How about some game theory examples that economics students may get as assignments?
A student who has learned non-cooperative game theory is asked to choose a social dilemma. The student cannot use examples given in lectures. He should be original. The job is to clarify the social predicament and assure the readers that it fulfills the norms of a social dilemma. He is asked to describe his social dilemma in a couple of game matrices. What about the first payoff matrix? It must be descriptive. The second payoff matrix should show the payoffs for every one of the four supposed situations.
The student must clarify the payoffs allocated to every strategy and outcome. He must also explain their relevance in defining the social dilemma.
He must Clarify the ‘rules’ of his game – He must classify the players, deliberate whether there’s complete information, deliberate whether it’s a one-shot game or repeated game, and more
He must converse the theories of Nash equilibrium, dominant strategies, and self-interested behavior
He must resort to his payoff matrix to define the Nash equilibrium in his selected social dilemma. He must also explain the outcomes that are predicted and weigh them against the results that the public would wish for
Finally, the students must converse whether his game theory application to his selected social dilemma has real-world evidence. He should contemplate how it’s possible to overcome this social dilemma in the real world and recount this back to his payoff matrix. He should clarify how his suggested solutions would motivate the ‘players’ to a more communally optimal outcome. He should consider what his non-cooperative game will predict in the face of repeated games, social preferences, government intervention, or altruism. He should explain these scenarios.
To do the above assignment, a student must know how to solve game theory matrix. They can take the help of a premium game theory assignment help provider.
Now, we discuss another example.
A student is asked to imagine a situation. A couple of firms, A and B, have grown to be the sole providers of fresh chicken meat in Japan. Each firm is seeking to increase its profits and is contemplating engaging in illegal price collusion by consenting to charge falsely high rates.
This practice is unlawful and risks substantial fines. The student must evaluate the interaction among the firms with game theory. He must model the condition based on the payoff matrix and assess it for Nash equilibrium.
He must answer some questions.
- The finest outcome for every firm
- The most satisfactory outcome for the public generally
- The role of each firm or the government to increase the chances of the public’s most satisfactory outcome
There are several other possible game theory economics examples as assignments for Economics students.
A qualified game theory tutor of quality game theory homework solutions providers can help students.
Next, we discuss two-game theory applications for which students may need professional game theory assignment help.
The use of game theory in IR
Game theory is practical in diverse zones to realize:
- Why an individual makes a definite selection
- How the selection of an individual affects others
All situations with a minimum of two decision-makers interacting are a game. Interactions are tactical as regards reciprocated, organized decisions. The tactical structure is associated with the truth that a few decisions have better or inferior results. Game theory scrutinizes these interactions and procedures mathematically. Several strategic interactions happen in international relations. Now, we look at a model assignment on game theory in international relations for Economics students.
A student is asked to picture a perfectly viable pure-exchange economy of one product and two clients. Also given is the two clients’ endowments of the product are positive. The student must answer the Walrasian equilibrium allotment of this economy. More? He must answer the equilibrium relative cost. He must clarify these answers with an example. He can take the help of an online game theory assignment help provider.
The use of game theory in Operations research
Operations research is a relatively new and practical science. It focuses on seeing, understanding, and forecasting the performance of utility man-machine systems. Workers consistently apply this knowledge to concrete snags in government, business, and society.
Problems in operations research are separated into elementary components and subsequently solved in clear steps by mathematical examination. Analytical techniques deployed in OR include network analysis, mathematical logic, game theory, and simulation queuing theory.
Applications of game theory in operations research help resolve conflicting situations of military and business operations. They provide a base for ascertaining the definite tactic that will cause utmost gain or minimum loss under specific conditions. Students may get several assignments on the use of game theory in operations research. An online game theory assignment help provider can help them.
The Bank Relocation Game
UK finance chief Stephen Jones labeled a no-deal Brexit as a catastrophe for the banking industry. Why exactly would this be? A no-deal Brexit would make it more difficult for financial flows to move across the border. This is largely because banks would lose their special passport and the right to conduct business in Europe once we leave the EU. For the banks, this is highly damaging because, without a deal, it will be harder for the banks to maintain their relationships with their European clients. Because of this no-deal scenario, the banks face a tough choice. Stay in London and hope that an agreement is reached or relocate to another European trading hub to protect their businesses. The important point is that the banks will have to make an imminent decision, even if the UK does manage to agree on a deal. The banks may have moved already. So should they stay or should they go? Using a two-stage game, I will answer this question.
In the first stage of the game, there are two players, HSBC and Lloyds, who will decide to stay or relocate. They must both decide at the same time. After making their decision, we assume that an agreement is reached, meaning that the banks retain their trading rights. If both banks decide to stay, they receive a payoff of five for coordinating. Both banks keep the European clients, and their businesses are protected. They also avoid the cost of relocating. If one bank decides to stay and the other decides to relocate, the remaining bank receives one. And the relocating bank receives four. The relocating bank bears the cost of moving offices but can take European clients off the remaining bank’s hands. If both banks decide to relocate, they receive three each. Both banks keep their European clients, but they bear the cost of relocating and leave against any additional European clients of the other.
The Game Solution
This game can be solved by identifying Nash equilibria. Nash equilibria occur when neither player can do any better by changing their strategy. Starting with stay, stay, we see that both HSBC and Lloyds don’t prefer to switch to relocate as five beats four for both banks. We also find that in relocate, relocate both HSBC and Lloyds don’t prefer to switch to stay as three beats, one for both banks.
However, when HSBC has decided to relocate, but Lloyds has decided to stay, HSBC does prefer to switch to stay because five beats four. Similarly, when Lloyds has decided to relocate, but HSBC has decided to stay. Lloyds does prefer to switch to stay because, again, five beats four. Henceforth are two pure strategies, Nash equilibria, a stay, stay and relocate, relocate as neither player has any incentive to deviate from the action.
We can now identify which equilibrium is payoff dominant. The dominant equilibrium is the one that delivers the highest payoff. In this case, is when both banks coordinate to stay so that they both receive five. The dominant risk equilibrium is the one with the highest Nash product. This is the opportunity cost of both players unilaterally deviating from the Nash equilibrium payoff. The Nash product of Stay Stay is equal to five minus four plus five minus four, Making 2. The Nash product of Relocate relocate is equal to three minus one plus three minus one making four. Therefore, relocate, relocate is our dominant risk equilibrium. So we have a conflict between our payoff and Risk Dominant Equilibria. Players favor the rich dominant solution, but we can make sure the dominant payoff solution is chosen by introducing contingent reward cooperation.
Suppose that the Bank of England is willing to reward the banks with higher interest rates if both decide to stay when both banks stay, a smoother Brexit is delivered, and therefore the bank is happy to raise interest rates. With higher interest rates, the banks earn higher profits and pay off five in the game’s second stage. However, if one or both banks decide to relocate, then a harsher Brexit is delivered. The bank is no longer willing to raise interest rates, and therefore the banks receive nothing in the second stage of the game as a punishment for not coordinating in the first stage of the game. By implementing this strategy, the banks are incentivized to coordinate in the first stage of the game. Hence they earn an overall payoff of 10 each rather than opting for the risk dominant solution, which only delivered a payoff of three each.
So what lessons have we learned? Our solution reflects upon the nature of coordination. We have to make our decisions alone. Coordination failure is prominent, as shown by the tendency of players to play the dominant action. However, through simple reward and punishment strategies, coordination failure can be overcome and benefit all agents.