Application of Nash Equilibrium in Macroeconomics

Powerful Essays
Arjun Pahwa Math Research Paper The Application of the Nash Equilibrium in Game Theory to Microeconomics ! One of the most challenging problems a business owner comes across is the

amount of a certain item he or she should stock and the price at which to sell it. Many factors play into ﬁnding this appropriate price. These include the cost of stocking the item, the projected demand, and what the competition is pricing the same item at. The latter of the three factors is considered to be the most challenging to consider. When attempting to tackle this problem we must consider three factors. First, we must be able to accurately predict the outcome of our decisions. Second, we must be able to accurately predict our competitionʼs decisions. Finally, we must be able to predict the outcome of our competitionʼs decisions. If all of these three requisites can be met our solution will be able to provide us the necessary information needed to price our item. ! The solution to this problem is game theory. Game theory is a branch of

mathematics that is used to predict the actions of an opponent or competitor in a certain “game.” Game theory has many applications including war, macro and microeconomics, and even biology. Game theory is a relatively new concept created by John von Neumann and Oskar Morgenstern in 1944. Over time it has evolved into a very complex ﬁeld of mathematics that has applications in many other ﬁelds. John von Neumannʼs contribution to game theory was speciﬁc to economics. He contributed the minmax theorem in 1928. This theorem stated that in certain zero sum games all players will be able to pick a strategy that will reduce the potential losses for all players. This principle was groundbreaking in all ﬁelds of economics, especially in microeconomics. Oskar

Morgenstern helped John von Neumann with his research. Other major contributors are John Nash, Reinhard Selten, and John Hersanyi. This paper will focus on the contributions of John Nash and

You May Also Find These Documents Helpful

• Good Essays

Nash Equilibrium and Dominant Strategies Nash Equilibrium is a term used in game theory to describe an equilibrium where each player's strategy is optimal given the strategies of all other players. A Nash Equilibrium exists when there is no unilateral profitable deviation from any of the players involved. In other words, no player in the game would take a different action as long as every other player remains the same. Nash Equilibria are self-enforcing; when players are at a Nash Equilibrium they…

• 782 Words
• 4 Pages
Good Essays
• Better Essays

FIXED POINTS AS NASH EQUILIBRIA ´ JUAN PABLO TORRES-MARTINEZ Received 27 March 2006; Revised 19 September 2006; Accepted 1 October 2006 The existence of ﬁxed points for single or multivalued mappings is obtained as a corollary of Nash equilibrium existence in ﬁnitely many players games. ı Copyright © 2006 Juan Pablo Torres-Mart´nez. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium…

• 1685 Words
• 7 Pages
Better Essays
• Satisfactory Essays

PROBLEM SET 3 Problems for Chapter 3 1. Suppose the consumption function in the U.S. is represented by the following equation: C = 200 + .5 YD, where YD = Y – T and T = 200. a. What is the level of consumption in this economy if YD = 0? Briefly explain how individuals “pay for” this consumption when YD = 0. b. Given the above parameters, calculate the level of consumption if Y = 1200. Suppose Y increases to 1300. What happens to the level of YD as Y increases to 1300 (i.e. calculate…

• 1406 Words
• 6 Pages
Satisfactory Essays
• Good Essays

A Tribute to John Nash It sounds like a Sport’s man dream. A Person got a one million dollar prize for their skill at analysing games. They are not television Pundits or armchair critics of Manchester United or Chelsea, but an Economists who won the Nobel Prize for economics for his studies of game theory. John Nash, In Pop culture he remembered as the man behind “A Beautiful Mind” and for the economists or specialists he’ll be remembered as a brilliant mathematician who won Nobel Prize in Economic…

• 774 Words
• 4 Pages
Good Essays
• Powerful Essays

Lab O6 – Equilibrium Lab Application Purpose: An introduction to the qualitative aspects of chemical equilibrium. Starting with a reaction at equilibrium, one will change the concentration of various ions present in the equilibrium, and record the states of the changing equilibrium through observation. Theory: Equilibrium- the point at which a solution has become perfectly saturated; when their forward and reverse reaction rates are equal Concentration- a measurement of how much solute…

• 1484 Words
• 6 Pages
Powerful Essays
• Good Essays

Security Dilemma the Collective Action Problem and the Nash Equilibrium. Criticism of the United Nations highlight the lack of power it has and its reliance on superpowers for legitimacy. The use by states of the UN is conditional on whether it serves state self-interest and whether the value of participating outweighs the cost (Abbott and Snidal 2005: 27). This brings into question why states would allow the UN to impose International laws and Norms that erode state sovereignty and how this…

• 1046 Words
• 5 Pages
Good Essays
• Powerful Essays

John nash

• 1315 Words
• 2 Pages

John Forbes Nash Jr. Introduction John Forbes Nash Jr. was born on June 13th of 1928. He has greatly impacted today’s society with his works in game theory, differential geometry, and partial differential equations. His theories are used in many aspects of our lives today such as in economics, computing, evolutionary biology, artificial intelligence, accounting, politics and in military theory. Within his lifetime Nash has received several prestigious awards. In 1…

• 1315 Words
• 2 Pages
Powerful Essays
• Good Essays

Econ209: Macroeconomic Analysis & Applications (Section 002) Tuesday & Thursday, 4:05 - 5:25 Arts W120 Professor: Paul Dickinson paul.dickinson@mcgill.ca Winter 2013 ******************************************** A: Course Content The 3-credit course covers the basics of economic theory and policy at the level of the whole economy - the macroeconomic level (e.g. national income, economic growth, employment/unemployment, prices & inflation, exchange rates, monetary and fiscal policy). It…

• 1159 Words
• 5 Pages
Good Essays
• Powerful Essays

Nash

• 10741 Words
• 43 Pages

PART 1 Foundations for Services Marketing Part Contents 1 Introduction to Services 2 Consumer behaviour in services 3 Customer expectations of service 4 Customer perceptions of service 5 Conceptual framework of the book: the gaps model of service quality 3 28 54 76 103 This ﬁrst part of the text provides you with the foundations needed to begin your study of services marketing. The ﬁrst chapter identiﬁes up-to-date trends, issues, and opportunities in services as a backdrop for the…

• 10741 Words
• 43 Pages
Powerful Essays
• Good Essays

John Nash

• 539 Words
• 3 Pages

John Nash Biography John Nash (June 13, 1928 – present) is a brilliant mathematician, specializing in economics. He was born n Westfield, West Virginia, into a family of three, he, his father – an electrical engineer, and his mother – a school teacher who pushed him to do many great things that led to his superb education and extraordinary mind. As a child, he had a quiet and withdrawn personality, but was very intelligent. He started reading at four, skipped a grade, and even learned Latin, all…

• 539 Words
• 3 Pages
Good Essays