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Game theory |
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Game TheoryGame Theory is a theory of rational behavior of participants in interactive decision-making scenarios. It helps predict how other participants of the situation / scenario (game) will respond in certain situations, or to certain decisions. Understanding participants' responses ahead of a decision, should help the initial decision maker make better decisions. It is applicable in areas such as:open sourcedevelopment. Freerider issues forexample. Should you contribute resources when somone else may benefitwithout contribution?standardssetting. Should you cooperate with your competitors to help expand andstandardize the marketplace?dynamicpricing. Should you bid at a price point, and will that create a higherbid from someone else?competitor reactions to decisions. When making marketing decisions, youcannot only analyze how your customers may respond without considering howyour competitors will respond, as this will in turn impact your customers.A popular game theory model, for a non-zero sum situation, is the prisoners dilemma.Game theoryThe modeling of strategic interactions among agents, used in economic models where the numbers of interacting agents (firms, governments, etc.) is small enough that each has a perceptible influence on the others.Similar MatchesProduct cycle theoryProduct cycle theoryTheory suggesting that a firm initially establish itself locally and expand into foreign markets in response to foreign demand for its product; over time, the MNC will grow in foreign markets; after some point, its foreign business may decline unless it can differentiate its product from competitors. Local expectations theoryLocal expectations theoryA form of the pure expectations theory that suggests that the returns on bonds of different maturities will be the same over a short-term investment horizon. Dow TheoryDow TheoryUsed in the context of general equities. Technical theory that a major trend in the stock market must be confirmed by simultaneous movement of the Dow Jones Industrial Average and the Dow Jones Transportation Average to new highs or lows. Cushion theoryCushion theoryThe theory that a stock with many short positions taken in it will rise, because these positions must be covered by the stock. Preferred habitat theoryPreferred habitat theoryA biased expectations theory that believes the term structure reflects the expectation of the future path of interest rates as well as risk premium. The theory rejects the assertion that the risk premium must rise uniformly with maturity, but instead profits that to the extent that the demand for and supply of funds do not match for a given maturity range, some participants will shift to maturities showing the opposite imbalances, as long as they are compensated by an appropriate risk premium whose magnitude will reflect the extent of aversion to either price or reinvestment risk. Further SuggestionsAgency theoryefficient market theory Dependency Theory Elliott Wave Theory Short interest theory Normal backwardation theory Conduit theory Modern portfolio theory New Trade Theory Greater fool theory Bicycle Theory Expectations theory of forward exchange rates Labor theory of value Theory of second best Portfolio theory Dow theory Efficient markets theory(EMT) Odd lot theory Complexity Theory Purchasing power parity theory Dow dividend theory Presidential election cycle theory Trade theory capital market theory Bubble theory |
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