Question

In: Economics

1.what are the two main shortcoming of a secure strategy in game theory?

1.what are the two main shortcoming of a secure strategy in game theory?

Solutions

Expert Solution

Game Theory is based on a competitive situation where finite number of competitors having Interests (Conflicting) and the actions are interdependent to the every active competitors.

The Main two shortcomings of the Theory of Games are -

  1. The analysis of the gaming strategy becomes complex and difficult with the increase in number of players. As far as taking into consideration if we take practical example of various firms in a oligopoly situation, the theory of games is complex to solve the problem and not useful in that condition.
  2. If we take practicality in the game theory, the assumed Maximin and Minimax show that the players are risk averse having complete knowledge of the strategies being planned for the competition.

The other shortcomings are -

  • The players having the knowledge of their own pay-off and others payoffs are unrealistic in nature. There is a provision of guess work only because the rival strategies are not known. The players can just assume the reaction of an action.
  • There is a probability of sharing of the strategies or business secrets among the competitors in order to work in collusion. As mentioned theory of games doesn't work effectively in Oligopoly. The mixed strategies are also not useful.

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