Assess the practical usefulness and the relevance of game theory in Essay - 1

Assess the practical usefulness and the relevance of game theory in light of the demanding assumptions behind the concept of the - Essay Example In addition, today game theory is used in a variety of behavioural relations and is extended to both human as well as non-humans. This theoretical framework first described zero-sum games where an individual’s gains are exactly equal to the net losses of other participant(s). This paper will assess the practical usefulness and the relevance of game theory in light of the demanding assumptions behind the concept of the Nash equilibrium. Game Theory The game theory is based on the fundamental concept of zero-sum games, and a game has elements such as players, actions, information, strategies, outcomes, payoffs, and equilibria. Game theory evaluates strategic interactions where the outcome of a player’s choices greatly depends on the choices of other players. Basically, for a situation to be a game, there should be at least two rational players who consider each other’s choices while framing strategies (QuickMBA). The game theory has two distinct branches namely coo perative and non cooperative game theory. Most of the cooperative games are expressed in the characteristic function whereas extensive and normal forms are used to illustrate non-cooperative games. Games are illustrated using trees (figure 1) under the extensive form and each node or vertex represents the point of choice of players participating (Fudenberg & Tirole, 1991, p. 67). Each rational player is particularly indicated by a number specified by the vertex. The participants’ possible actions are depicted by the lines projecting out of the vertex while bottom of the tree represents the payoffs (Ibid). The authors add that the extensive form can be termed as â€Å"a multi-player generalisations of a decision tree† (Ibid). (Source: Ross, 2012) Under the normal form or strategic form, a matrix representing players, strategies, and payoffs is used for illustration. A major assumption when the normal form is used to indicate a game is that each participant makes choices without actually knowing the choices or actions of others. When players’ actions are known to other participants, generally the extensive form is used to represent the game. The characteristic function form was developed by scholars like John von Neumann and Oskar Morgenstern. The authors claim that when a union C appears, it begins to work against the fraction (N/C) as if two players were participating in a normal game. Nash Equilibrium Nash equilibrium is a complex concept associated with the game theory. As Osborne (1994, p. 9) clearly states, â€Å"Nash equilibrium is a steady state solution concept in which each player’s decision depends on knowledge of the equilibrium†. More precisely, under the Nash equilibrium, it is assumed that each player knows the equilibrium strategies of other participants and no player can gain anything by altering their own strategy. The concept of Nash equilibrium has a wide range of applications in connection with the game the ory. Game theorists widely use this solution concept to interpret the outcomes realised from several decision makers’ strategic interactions. It greatly assists analysts to predict what would happen if several players are forming decisions simultaneously and if the outcome depends on others’ decisions. Nash equilibrium is potential to analyse unpleasant situations like arms

International Business Environment & Trade Essay

International Business Environment & Trade - Essay Example The remedies are not determined easily as they may be complicated when the contracting parties originate from countries that have different legal systems. The codes of law from different countries contain legal principles which are upheld and enforced by courts. Legal frameworks exist from scratch borrowed from civil law system and may incorporate the common law principles. This paper attempts to explain the complexity that is involved in harmonizing the international trade through international transaction for the sale of goods. The international transaction for the sale of goods to harmonize the laws on international sales. This serves as a code for the common law and incorporates the principles outlined in common law, civil and socialist laws. This strikes a compromise between the principles from various legal systems but criticisms have been leveled against it. However, there has been a shortcoming which must be applauded as worthwhile attempt towards harmonizing in place of diversity that otherwise would prevail. The CISG provides common rules that govern the international sales. This does not apply to all transactions involving sale of goods. CISG only governs formation of sale contracts and outlines the rights and duties of both buyer and seller. This has altered the established law o sales. Nevertheless, this does not allow for terms of usage and validity of the contract. The scope of CISG application is contained in articles 4 and 5. Similar to other conventions that aim at harmonizing certain secti ons of the law, CISG has not been able to provide a comprehensive code regarding the regulation of the matters falling within certain spheres of application. Some matters have been termed as controversial due to the difference between national laws making it hard to harmonize various approaches (Burnett, 2004). In its move to ensure maximum support, drafters decided to neglect some issues outside the scope by CISG and opted for a highly acceptable