Question

1) Find a problem in which game theory or decision theory fails. For examples not taking into account emotions or framing effects and represent it using the concepts of game theory or
decision theory and solve it. It can be any kind of problem.

a. Compare your results with the real-life results.
b. In case the results do not coincide explain why. Which is the element that the
theory does not reflect?

Answer 1

Game theory is based on strategic and mathematical concept. It ignores the irrational behavior or the behaviour based on emotions.

Example: The bàttle of sexes

We usually assume that there is ballet and football and the women prefers ballet and hates football. And the payoffs are given as 2,1 when both go for ballet ie 2 is the payoff for women and 1 for men. Similarly the opposite when they go for football.

Now if suppose there is a situation,that the woman absolutely abhors going to football with her husband because he screams a lot, picks up fights with the staff, in order to meet the football players , behaves obnoxiously and all this is emotionally taxing on the woman and no matter what, if she goes to see match with him, her payoff is negative instead of zero which would be when she goes to see it alone.

So now the case is different. The woman is getting payoff 0 when she sees either the dance or the football alone and gets negative payoff when she sees the match with her husband.

Hence the Nash equilibrium would Change in this case which would be

When wife chooses ballet, husband is better off as ballet and when wife chooses football, husband is better off with football. Similarly if husband chooses ballet, women is better off as ballet and if husband chooses football, woman would prefer going to ballet alone. So here there would be only one Nash equilibrium ie (ballet, ballet)

b) The results do not coincide because of husband's irrational behavior which is emotionally taxing for the wife.

Husband

wife

	Ballet	football
Ballet	2,1	0,0
Football	0,0	-1,2

(You can comment for doubts)