Game of Theory And Types of Markets.

1. Presentation on Economics
Game Theory
Types Of Market
&
Sagar Singh Chouhan
IIMS, SBES PUNE

2. Game Theory
Quantitative Analysis for Decision Making

3. Outline
• What is Game Theory?
• History of Game Theory
• Applications of Game Theory
• Key Elements of a game
• Types of games
• Pure Strategies & Mixed Strategies

4. What is Game Theory?
• In strategic games, agents choose strategies
that will maximize their return, given the
strategies the other agents choose.
• The mathematics of human interactions

5. History of Game Theory
• von Neumann wrote a key paper in 1928
• 1944: “Theory of Games and Economic
Behavior” by von Neumann and Morgenstern
• 1950: Nash invents concept of Nash
equilibrium
• Game theory booms after this…
• 1994: Harsanyi, Nash, and Selten win Nobel
Prize in economics for game theory work

6. Applications of Game Theory
• Mathematics
• Computer Science
• Biology
• Economics
• Political Science
• International Relations
• Philosophy
• Psychology
• Law
• Military Strategy
• Management
• Sports
• Game Playing

7. Key Elements of a game
• Players: Who is interacting?
• Strategies: What are their options?
• Payoffs: What are their incentives?
• Information: What do they know?
• Rationality: How do they think?

8. Types of games
• Cooperative or non-cooperative
• Zero sum and non-zero sum
• Simultaneous and sequential
• Perfect information and imperfect
information
• Finite & Infinite Strategies

9. Pure Strategies
• The upper value of the game is equal to the
minimum of the maximum values in the
columns.
• The lower value of the game is equal to the
maximum of the minimum values in the
rows.

10. Mixed Strategies
• A mixed strategy game exists when
there is no saddle point. Each player will
then optimize their expected gain by
determining the percent of time to use
each strategy.

11. Now let’s Play This Game
Pirate Game

12. What is The market Structure?
• Those
characteristics of
the market that
significantly affect
the behavior and
interaction of
buyers and sellers.

13. Things To Be Considered
• Number and size of
sellers and buyers
• Type of the product
• Conditions of entry and
exit
• Transparency of
information

14. Types Of Market Structure
1.Pure (perfect) Competition
2.Monopoly
3.Monopolistic Competition
4.Oligopoly

15. Pure (perfect) Competition
• Many and small sellers, so that no one
can affect the market
• Homogeneous product
• Free entry to and exit from the industry
• Transparent and free information

16. Monopoly
• A single seller: the firm and industry are
synonymous.
• Unique product: no close substitutes for the firm’s
product.
• The firm is the price maker: the firm has
considerable control over the price because it can
control the quantity supplied.
• Entry or exit is blocked.

17. Monopolistic Competition
• Multiple firms produce similar products
• Firms face down sloping demand curves
• Profit maximization occurs where MC=MR
• In the limit, firms compete away economic
profits

18. Oligopoly
• Few large firms: each must consider its
rivals’ reactions in response to its decisions
about prices, output, and advertising.
• Standardized or differentiated products
• Entry is hard: economies of scale, huge
capital investment may be the barriers to
enter.