Question

How does the Nash Theorem apply to Visa Inc and the interaction with its competition?

Answer 1

Nash Equilibrium is a fundamental concept used in game theories as well as as widely used method of predicting outcomes of statergic interactions in social sciences.Visa Inc is an multinational financial company facilitating the various fund transferring facilities through out the world.The key ideas of economic analysis is to provide platforms that are characterised by network effects.People need to use visa cards since they are widely accepted and merchants want to accept it since most people have them.Each consumer value for platform depends on intrinsic value(b),price change by platforms(p),number of users f(n).

consumer value: b-p+f(n)

platforms set prices then potential users make individual decisions to participate or not .Number of users 'n' is determined as Nash Equilibrium.If f(n) increases there are more users ,more attractive to join and f(n) decreases then more users but less attractive to join.Consumers choose single platforms,both platform prices fixed ,so price not a factor.so it is concluded that high level views emphazis the network effects and important of assembling a user.If there is competition it is optimal to compete aggressively for users who 'single home' while setting high prices for multi homing users.