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Essay / Research Paper Abstract
10 pages. Standard microeconomics provides a theory of decision-making in which the outcomes of various decisions are known. Game theory provides rational solutions when the outcomes are uncertain. Game theory has proven very useful in the study of many things such as oligopoly markets in which each participant must take account of the reactions of its competitors. For the purpose of this paper the writer considers the use of game theory in understanding the relationship between the member nations of the United Nations. This is an intriguing and enlightening look at both the concept of Game Theory in Economics as well as the relationship between various nations. Bibliography lists 10 sources.
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10 pages (~225 words per page)
File: D0_JGAgamet.rtf
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Game theory has proven very useful in the study of many things such as oligopoly markets in which each participant must take account of the reactions of its competitors.
For the purpose of this paper the writer considers the use of game theory in understanding the relationship between the member nations of the United Nations. This is an
intriguing and enlightening look at both the concept of Game Theory in Economics as well as the relationship between various nations. UNDERSTANDING GAME THEORY Game theory is a theory
of rational decision making under conditions of uncertainty. This theory was developed by John von Neumann (1903-1957) and Oskar Morgenstern (1902-1977) in a book entitled The Theory of Games
and Economic Behavior, 1944 (Abbott 2002). Games are usually described as being either zero sum or non-zero sum. Zero-sum games are those where one players gain is
another persons loss. Non-zero sum games open the door to collusion or cooperative action because all players may gain from a certain course of action. PUTTING GAME THEORY
TO USE Currently insurance companies are extremely reluctant to offer insurance against terrorist events. Because insurance companies currently owe more than $50 billion due to the events of September
11, they are reluctant to willingly allow insurance coverage due to the inability to calculate the risk of terrorist events. "The challenge is theres no type of consensus about
what the probability of a terrorist event might be," notes Keith Buckley, managing director at Fitch Ratings, an insurance-ratings firm. "With natural catastrophes, they can look at the historical frequency.
For man-made catastrophes, history doesnt repeat itself" (Oster, 2002, PG). This is the perfect example of the usefulness of game theory, although many analysts disagree on that argument. "To
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