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The main aim of applying the game theory is to find out the best strategy to resolve a particular problem. Moreover, the game theory helps organization by increasing the probability of earning maximum profit and reducing the probability of losses.
The game theory has applications in sociology, psychology, and mathematics. The game theory provides an appropriate solution of a problem if its conditions are properly satisfied. These conditions are often termed as the assumptions of the game theory. Assumes that all players in the game are aware of the game rules as well as outcomes of other players.
Among the aforementioned assumptions, the last two assumptions make the application of the game theory confined in real world. Game theory is based on the concept of strategy and payoffs. Strategy indicates an action that a player takes when challenged to solve a particular problem.
On the other hand, payoff refers to the outcome of the strategy applied by the player. While used in a number of disciplines, game theory is most notably used as a tool within the study of economics. The economic application of game theory can be a valuable tool to aide in the fundamental analysis of industries, sectors and any strategic interaction between two or more firms.
Here, we'll take an introductory look at game theory and the terms involved, and introduce you to a simple method of solving games, called backwards induction. Any time we have a situation with two or more players that involves known payouts or quantifiable consequences, we can use game theory to help determine the most likely outcomes.
As with any concept in economics, there is the assumption of rationality. There is also an assumption of maximization. It is assumed that players within the game are rational and will strive to maximize their payoffs in the game. This will exclude any "what if" questions that may arise.
The number of players in a game can theoretically be infinite, but most games will be put into the context of two players. One of the simplest games is a sequential game involving two players. Below is a simple sequential game between two players. The numbers in the parentheses at the bottom of the tree are the payoffs at each respective point.
The game is also sequential, so Player 1 makes the first decision left or right and Player 2 makes its decision after Player 1 up or down. Backwards induction, like all game theory, uses the assumptions of rationality and maximization, meaning that Player 2 will maximize his payoff in any given situation. At either information set we have two choices, four in all.
By eliminating the choices that Player 2 will not choose, we can narrow down our tree.
In this way, we will bold the lines that maximize the player's payoff at the given information set. After this reduction, Player 1 can maximize its payoffs now that Player 2's choices are made known. For example, Fiske argued that in Western cultures taking calculative approaches to social relations is associated with greater psychological distance [ 59 ], less intense moral obligations [ 60 ], and more selfishness [ 61 ].
Economics students may thus not only learn rational choice theory but also learn to associate it with a specific behavior that they in turn expect from others.
As a consequence, economics students may be more committed to maximize profits rather than to sympathize with other individuals. This does not necessarily mean that economics students are more skeptical and behave more selfishly outside the context of games. Research combining game experiments with field studies would be needed to test how well the choices of economics students—and other students—actually predict their behavior outside the laboratory.
The fact that economics students behave more selfishly than other students is rather critical for experimental practice. Experimental games aim at extrapolating findings from the laboratory to the world beyond [ 63 ]. Yet most experimental games are exclusively conducted among university students—especially economics students [ 64 ]. Although research suggest that students behave rather similar to non-student population groups [ 64 , 65 ] variation within the student participant pool is frequently neglected, potentially constraining generalization.
To conclude, this study demonstrated that economics students behaved more selfishly than other students in a third-party punishment game. Analyses of three mechanisms potentially underlying this pattern of results suggest that the more selfish behavior is not due to differences in fairness concerns or notions of fairness, but to the greater skepticism among economics students.
This finding sheds new light on the debate about potential links between studying economics and selfish behavior. Selfish behavior is not free from context and can have different motives. In some contexts, economics students behave more selfishly because they expect others to do so. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript. National Center for Biotechnology Information , U.
PLoS One. Published online Sep 5. Author information Article notes Copyright and License information Disclaimer. Competing Interests: The author has declared that no competing interests exist.
Received Apr 28; Accepted Aug This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. This article has been cited by other articles in PMC. S1 Description Dataset: S1 Instructions: Abstract Do economics students behave more selfishly than other students?
Introduction Economists seem to have never enjoyed a good reputation among their peers. Experiments and economics students A central finding of experiments involving monetary allocation decisions is that substantial numbers of people do not behave according to the predictions of game theory [ 16 , 17 ].
Yet comparing economics students with other participants proved difficult because [m]ore than one-third of the economists either refused to answer the question regarding what is fair, or gave very complex, uncodable responses.
The following hypotheses are tested: Methods Participants The study was conducted at a major British university at the end of the academic year. Materials and procedure The study involved a third-party punishment game [ 42 , 43 ].
Open in a separate window. Fig 1. Results Relative to other students, economics students made more selfish decisions A prerequisite for further analyses was that the third-party punishment game would replicate that economics students behave more selfishly. Fig 2. Offers made by study major. Table 1 Economics students made lower offers. Predictor b SE z p Intercept 4.
Table 2 Neither studying economics nor gender predicted references to fairness. Fig 3. Responses to what would be a fair offer by major. Bean plots and one-sided Wilcoxon rank-sum tests with n.
Table 3 Studying economics did not predict the notion of fairness but gender did. Relative to other students, economics students expected other participants to make more selfish decisions In their role as receivers, all participants were asked how much they expected their assigned proposer to offer.
Fig 4. Expected offers by major. Table 5 Economics students expected lower offers. Predictor b SE z p Intercept 3. Fig 5. Offers vetoed by study major. Table 6 Economics students were less likely to veto offers that were perceived as unfair.
Table 7 Redistribution of vetoed offers. Discussion This study demonstrated that, relative to their fellow students, economics students offered less in a third-party punishment game; they were about equally likely concerned with fairness, and they had a similar understanding of what was fair. Conclusion To conclude, this study demonstrated that economics students behaved more selfishly than other students in a third-party punishment game. Data Availability The database and the source code can be found online at https: References 1.
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