Understanding Games theory – Part 1

  • Games in general is interaction between two or more people where the outcomes of interactions depends on what everybody does and everybody has different level of happiness for different outcomes.
  • Games theory are strategic interactions amongst self interested agents. Often it is referred to as mathematical modelling tool. It is always interesting to analyse how interactions between agents are structured in order to lead good outcomes.
  • Some questions that needs consideration –
    • All possible actions that can be taken by the players of the game?
    • Does it matter if the player of the game think that the opponent is rational
    • What effects would communications have?
  • Many decisions are taken in a competitive situation in which the outcome depends not on that decision but rather on the interaction between the decision maker and that of its competitors.
  • Often following assumptions are made in the games theory – a. There are finite number of participants called players b. Each player has finite number of strategies c. The participants know the rules governing the game d. There is conflicting interest between the participants e. Every game results in an outcome f. The gain of the participant is dependent upon the decision of his opponent and his own game

<<The aim of this series is to explain the concept of games theory through series of posts and analyse whether games theory could be helpful in determination of profit allocation for taxation of digital economy>>

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