Notes on the Economics of Game Theory - Part II

Written by Sam Vaknin


Continued from page 1

A Stable Strategy is similar to a Nash solution though not identical mathematically. There is currently no comprehensive theory of Information Dynamics. Game Theory is limited torepparttar aspects of competition and exchange of information (cooperation). Strategies that lead to better results (independently of other agents) are dominant and where allrepparttar 132673 agents have dominant strategies a solution is established. Thus,repparttar 132674 Nash equilibrium is applicable to games that are repeated and wherein each agent reacts torepparttar 132675 acts of other agents. The agent is influenced by others but does not influence them (he is negligible). The agent continues to adapt in this way until no longer able to improve his position. The Nash solution is less available in cases of cooperation and is not unique as a solution. In most cases,repparttar 132676 players will adopt a minimax strategy (in zero-sum games) or maximin strategies (in nonzero-sum games). These strategies guarantee thatrepparttar 132677 loser will not lose more thanrepparttar 132678 value ofrepparttar 132679 game and thatrepparttar 132680 winner will gain at least this value. The solution isrepparttar 132681 "Saddle Point".

The distinction between zero-sum games (ZSG) and nonzero-sum games (NZSG) is not trivial. A player playing a ZSG cannot gain if prohibited to use certain strategies. This is notrepparttar 132682 case in NZSGs. In ZSG,repparttar 132683 player does not benefit from exposing his strategy to his rival and is never harmed by having foreknowledge of his rival's strategy. Not so in NZSGs: at times, a player stands to gain by revealing his plans torepparttar 132684 "enemy". A player can actually be harmed by NOT declaring his strategy or by gaining acquaintance withrepparttar 132685 enemy's stratagems. The very ability to communicate,repparttar 132686 level of communication andrepparttar 132687 order of communication are important in cooperative cases. A Nash solution:

Is not dependent upon any utility function;

It is impossible for two players to improverepparttar 132688 Nash solution (=their position) simultaneously (=the Paretto optimality);

Is not influenced byrepparttar 132689 introduction of irrelevant (not very gainful) alternatives;

and

Is symmetric (reversingrepparttar 132690 roles ofrepparttar 132691 players does not affectrepparttar 132692 solution).

(continued)

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, United Press International (UPI) and eBookWeb and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com.

Visit Sam's Web site at http://samvak.tripod.com




The Distributive Justice of the Market - Part II

Written by Sam Vaknin


Continued from page 1

According to Rawles' Difference Principle, all tenets of justice are either redistributive or retributive. This ignores non-economic activities and human inherent variance. Moreover, conflict and inequality arerepparttar engines of growth and innovation - which mostly benefitrepparttar 132671 least advantaged inrepparttar 132672 long run. Experience shows that unmitigated equality results in atrophy, corruption and stagnation. Thermodynamics teaches us that life and motion are engendered by an irregular distribution of energy. Entropy - an even distribution of energy - equals death and stasis.

What aboutrepparttar 132673 disadvantaged and challenged -repparttar 132674 mentally retarded,repparttar 132675 mentally insane,repparttar 132676 paralyzed,repparttar 132677 chronically ill? For that matter, what aboutrepparttar 132678 less talented, less skilled, less daring? Dworkin (1981) proposed a compensation scheme. He suggested a model of fair distribution in which every person is givenrepparttar 132679 same purchasing power and uses it to bid, in a fair auction, for resources that best fit that person's life plan, goals and preferences.

Having thus acquired these resources, we are then permitted to use them as we see fit. Obviously, we end up with disparate economic results. But we cannot complain - we were givenrepparttar 132680 same purchasing power andrepparttar 132681 freedom to bid for a bundle of our choice.

Dworkin assumes that prior torepparttar 132682 hypothetical auction, people are unaware of their own natural endowments but are willing and able to insure against being naturally disadvantaged. Their payments create an insurance pool to compensaterepparttar 132683 less fortunate for their misfortune.

This, of course, is highly unrealistic. We are usually very much aware of natural endowments and liabilities - both ours and others'. Therefore,repparttar 132684 demand for such insurance is not universal, nor uniform. Some of us badly need and want it - others not at all. It is morally acceptable to let willing buyers and sellers to trade in such coverage (e.g., by offering charity or alms) - but may be immoral to make it compulsory.

Most ofrepparttar 132685 modern welfare programs are involuntary Dworkin schemes. Worse yet, they often measure differences in natural endowments arbitrarily, compensate for lack of acquired skills, and discriminate between types of endowments in accordance with cultural biases and fads.

Libertarians limit themselves to ensuring a level playing field of just exchanges, where just actions always result in just outcomes. Justice is not dependent on a particular distribution pattern, whether as a starting point, or as an outcome. Robert Nozick "Entitlement Theory" proposed in 1974 is based on this approach.

Thatrepparttar 132686 market is wiser than any of its participants is a pillar ofrepparttar 132687 philosophy of capitalism. In its pure form,repparttar 132688 theory claims that markets yield patterns of merited distribution - i.e., reward and punish justly. Capitalism generate just deserts. Market failures - for instance, inrepparttar 132689 provision of public goods - should be tackled by governments. But a just distribution of income and wealth does not constitute a market failure and, therefore, should not be tampered with.



Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, United Press International (UPI) and eBookWeb and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com.

Visit Sam's Web site at http://samvak.tripod.com




    <Back to Page 1
 
ImproveHomeLife.com © 2005
Terms of Use