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What is the behavioral economics essay
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1. Introduction
The theory of Nash equilibrium by John Nash (1951) has been a central concept in game theories and further more for a wide range from economics even to the social and environmental sciences studies. Besides the game theory, David (2012) has recalled that, there are three unrealistic traits of standard economic model of human behavior – “unbounded rationality, unbounded willpower, and unbounded selfishness – all of which behavioral economics modifies.” However, consider the assumption of Nash equilibrium theory, there is a hypothesis about all players in the game they are rational and understand the rule of the game. Which means they do know about their opponents choices and what reaction they are going to choose with the goal of profit maximization (or their own objectively goal). In the following there will be a further discussion and line out the practicality of Nash equilibrium.
2. Model and Discussion
Nash equilibrium is the set of result with none of the players have incentive to change their strategies (either pure or mixed) with their profit maximization (or own objectively goal).(Martin,2009;Michael et al.,2013)By using the very famous non-zero-sum game example in game theory, prisoner’s dilemma, it is the easiest way for us to understand the basic means of Nash equilibrium. The police caught two thefts and now they are referencing. Once it gives out a payoff matrix of the thefts (Fig 1.) and result in how many months they are in jail, as the theft is telling the truth (Cooperate) or lying (Defect), first payoff will be player 1’s and the second following will represent as player 2’s. (James et al., 1993)
Fig 1. The Prisoner’s Dilemma
‘Rational Cooperation in the Finitely Repeated Prisoner's Dilemma...
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...012). Is behavioural economics doomed?. Cambridge: Open Book Publisher CIT Ltd. Available from : http://www.openbookpublishers.com/reader/77 [Accessed 13th Nov 2013]
Martin J.Osborne. (2009). Nash Equilibrium: Theory. In: An introduction to game theory. New York: Oxford University Press. Inc. p13-53.
Michael Maschler, Eilon Solan, Shmuel Zamir. (2013) Game Theory Trans. Ziv Hellman,USA, Cambridge University Press.
Websites:
Geoff Riley . (2012). Oligopoly & Game Theory. Available: http://tutor2u.net/economics/revision-notes/a2-micro-oligopoly-game-theory.html.[Accessed 14th Nov 2013]
Journal Articles:
James Andreoni and John H. Miller. (1993). Rational Cooperation in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence. The Economic Journal. 103 (418), p570-585.
John Nash. (1951). Non-Cooperative Games. The Annals of Mathematics. 52 (2), 286-295.
...of action. If they were using reflective Equilibrium they would not have known how their decisions and actions would affect them when they selected it. Because of human nature, as well as companies, like Helena, becoming greedy and selfish, too much emphasis is placed on reason, rather than the safety, justice and well-being of others. If Helena were to remove their preconceived notions of wanting to increase profit at the cost of others, they may be able to put themselves in the shoes of the townfolk who live nearby the pollution.
Prisoners dilemma, is a theoretical game played between two individuals who can choose to either cooperate with one another or defect. Either choices give completely different payoffs. Both individuals cooperating, gives a greater pay off allowing for both individuals to benefit whereas one individual defecting while the other cooperates allows for one individual (defecting individual) to receive
Practically, in a situation where both sides dispose of no more than 10 big blinds, which is considered too low stack, for one, to do anything else but either bet all in or fold his or her cards, Nash Equili...
Hocking and Waud 1992, `Oligopoly and Market Concentration' in Microeconomics 2nd Edition, Harper Educational Publishers, NSW, pp-315-342.
... make anything, because their partner would begin to defect as well. They were coaxed to cooperate by the prisoner’s dilemma, collective security and democratic peace theories, which is proven by the end results of the game where everybody’s amounts were fairly similar if not equal to one another. Instead of fighting to be more powerful, counties joined together to be equal.
Princeton, 1963. Hailstone, Thomas and Rothwell, John. Managerial Economics, pp. 93-95. Prentice Hall, 1993.
Real life isn't fair like that and Sociological Monopoly shows that. Those who start off the game poor only get poorer. Those who are rich get richer and have an easier time. In this alternate version you can take out loans but you have to pay them back with interest. Those who are poor take out loans thinking they will get ahead but they only get in debt.
Famously, John Rawls is regarded as using reflective equilibrium (RE) to justify his principles of justice. But the point of justification by RE in Rawls's more recent work is not easily established since he regards his own work as still contractarian. In order to clarify matters, I distinguish between wide and narrow RE, as well as show that wide RE consists of several kinds of narrow RE: RE as a plea for (re)consideration, RE as a constructive procedure of choice, and safe ground RE. The connection of these REs is shown in order to reach justification. The point of introducing RE for justification is seen in opening the range of possible revisions to allow for consensus. However, (the lack of) wide RE for itself is not enough to bring about revision. Rather, an additional causal link between two kinds of RE is proposed to be necessary.
Dowding, K. (2011). Rational choice theory. In M. Bevir (Ed.), The SAGE Handbook of Governance (pp. 36-40). Retrieved from http://books.google.com/books?id=dU8BNNYnZesC&printsec=frontcover
...Although this theory is very rational and scholarly it again asks for a very ideal situation of fairness where the chances of both disputants coming to these terms seems unattainable. Also, it is quite obvious that what one sees as fair, another may not. All the same, the theory by itself provides great principles for negotiation that if followed honestly by both parties would most likely lead to a satisfactory agreement.
However, in the original position, two conditions would eliminate unnecessary influence by mandating that parties representing citizens be 1) Rational and mutually disinterested (meaning that parties favor more benefits of social cooperation than less) and 2) maintain equal bargaining power. These conditions in the original position hypothetically allow a fair bargaining situation and Rawls argues that the ‘right’ principles to govern the basic structure of society would be chosen under these conditions. The guiding idea of the original position is that all citizens are fundamentally equal; therefore justice should begin from the presumption that all benefits of social cooperation should be equally
The dilemma of collective actions is an objectively existing social phenomenon. Western scholars create theoretical models about dilemma of collective actions and provide theoretical interpretations according to the reflections to the real world. “These collective actions will be problems such as short supply of public goods, overuse of public resource, disorder of public order, loss of public organization efficiency and anomie of public policy implementation.” (Chen tan, 2009, Theoretical Interpretation … under Non-cooperation Game)
In Martin Hollis and Steven Lukes editors Rationality and Relativism (Cambridge Press, 1982).
The crucial importance and relevance of economics related disciplines to the modern world have led me to want to pursue the study of these social sciences at a higher level. My study of Economics has shown me the fundamental part it plays in our lives and I would like to approach it with an open mind - interested but not yet fully informed.
Hoffman, J. & Graham, P. (2009), Introduction to Political Theory, 2nd Edition: London: Pearson Education Limited.