Game theory


 

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Game Theory

Game 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 theory

The 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.



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Local expectations theory

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Dow Theory

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Cushion theory

Cushion theory

The theory that a stock with many short positions taken in it will rise, because these positions must be covered by the stock.


Preferred habitat theory

Preferred habitat theory

A 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 Suggestions

Agency theory
efficient 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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