...concentrating on the history of thought General historic interest (assumed!) Developing a sense for connections between political/technical history and the emergence of new economic ideas Many recently discussed topics in economics have ancestors in previous decades and centuries; many ‘brand-new’ approaches actually possess long beards (however often forgotten). Hans-Walter Lorenz (FSU Jena) A Short History of Economic Thought Winter 2012/13 3 / 93 Outline, Relevance, and Contents Outline, Relevance, and Contents Contents The Classics – Quesnay, Smith, Ricardo, Say, Malthus, Marx The Neoclassics – Marshall, Walras, Menger, Gossen The Keynesian Revolution The Neoclassical Synthesis and the New Classical School Strategic Behavior and Game Theory Evolutionary Economics Hans-Walter Lorenz (FSU Jena) A Short History of Economic Thought Winter 2012/13 4 / 93 The Classics The Classics The Most Influential Classical Writers: Francois Quesnay (1694 - 1774) ¸ Adam Smith (1723 - 1790) David Ricardo (1772 - 1823) Jean-Baptiste Say (1767 - 1832) Robert Malthus (1766 - 1834) Karl Marx (1818 -...
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...( c Lucius & Lucius, Stuttgart) p. xxx–xxx Herbert Gintis Behavioral Game Theory and Contemporary Economic Theory Abstract: It is widely believed that experimental results of behavioral game theory undermine standard economic and game theory. This paper suggests that experimental results present serious theoretical modeling challenges, but do not undermine two pillars of contemporary economic theory: the rational actor model, which holds that individual choice can be modeled as maximization of an objective function subject to informational and material constraints, and the incentive compatibility requirement, which holds that macroeconomic quantities must be derived from the interaction and aggregation of individual choices. However, we must abandon the notion that rationality implies self-regarding behavior and the assumption that contracts are costlessly enforced by third parties. 1. Introduction The articles that serve as the focus of this Symposium on Altruism are among the best of a new genre. The genre is behavioral game theory, which may be loosely defined as the application of game theory to the design of laboratory experiments. Behavioral game theory aims to determine empirically how individuals make choices under conditions of uncertainty and strategic interaction. It is widely believed that experimental results of behavioral game theory undermine standard economic and game theory. This paper suggests that experimental results present serious theoretical...
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...Oligopoly * An oligopoly is a form of industry (market) structure characterized by a few dominant firms. Products may be homogeneous or differentiated. * The behavior of any one firm in an oligopoly depends to a great extent on the behavior of others Oligopoly Models * All kinds of oligopoly have one thing in common: * The behavior of any given oligopolistic firm depends on the behavior of the other firms in the industry comprising the oligopoly. The Collusion Model * A group of firms that gets together and makes price and output decisions jointly is called a cartel. * Collusion occurs when price- and quantity-fixing agreements are explicit. * Tacit collusion occurs when firms end up fixing price without a specific agreement, or when agreements are implicit. The Cournot Model * The Cournot model is a model of a two-firm industry (duopoly) in which a series of output-adjustment decisions leads to a final level of output between the output that would prevail if the market were organized competitively and the output that would be set by a monopoly. The Kinked Demand Curve Model * The kinked demand model is a model of oligopoly in which the demand curve facing each individual firm has a “kink” in it. The kink follows from the assumption that competitive firms will follow if a single firm cuts price but will not follow if a single firm raises price. The Kinked Demand Curve Model * Above P*, an increase in price...
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...2.Literature Review 2.0 Game theory and Microeconomics A game can be defined as a formal description of a strategic situation. It is a complete mathematical summary of a strategic interaction setting. Likewise, Game theory is the formal study of decision-making in which several players must make choices that potentially affect the interest of other players. Game theory addresses the dilemma in conflict and cooperation. The concepts of Game theory apply whenever the actions of several agents or players are interdependent within a competitive situation. These agents include individuals, groups, firms or a combination among these. Formal applications of Game theory requires knowledge of the identity of independent actors or players, their preferences...
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...An introduction to game theory by Martin J. Osborne. Version: 2002/7/23. Martin.Osborne@utoronto.ca http://www.economics.utoronto.ca/osborne Copyright © 1995–2002 by Martin J. Osborne. All rights reserved. No part of this book may be reproduced by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from Oxford University Press, except that one copy of up to six chapters may be made by any individual for private study. 2 Nash Equilibrium: Theory 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 Strategic games 11 Example: the Prisoner’s Dilemma 12 Example: Bach or Stravinsky? 16 Example: Matching Pennies 17 Example: the Stag Hunt 18 Nash equilibrium 19 Examples of Nash equilibrium 24 Best response functions 33 Dominated actions 43 Equilibrium in a single population: symmetric games and symmetric equilibria 49 Prerequisite: Chapter 1. 2.1 Strategic games is a model of interacting decision-makers. In recognition of the interaction, we refer to the decision-makers as players. Each player has a set of possible actions. The model captures interaction between the players by allowing each player to be affected by the actions of all players, not only her own action. Specifically, each player has preferences about the action profile—the list of all the players’ actions. (See Section 17.4, in the mathematical appendix, for a discussion of profiles.) More precisely, a strategic game is defined as follows...
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...Game Theory∗ Theodore L. Turocy Texas A&M University Bernhard von Stengel London School of Economics CDAM Research Report LSE-CDAM-2001-09 October 8, 2001 Contents 1 What is game theory? 2 Definitions of games 3 Dominance 4 Nash equilibrium 5 Mixed strategies 6 Extensive games with perfect information 7 Extensive games with imperfect information 8 Zero-sum games and computation 9 Bidding in auctions 10 Further reading 4 6 8 12 17 22 29 33 34 38 This is the draft of an introductory survey of game theory, prepared for the Encyclopedia of Information Systems, Academic Press, to appear in 2002. ∗ 1 Glossary Backward induction Backward induction is a technique to solve a game of perfect information. It first considers the moves that are the last in the game, and determines the best move for the player in each case. Then, taking these as given future actions, it proceeds backwards in time, again determining the best move for the respective player, until the beginning of the game is reached. Common knowledge A fact is common knowledge if all players know it, and know that they all know it, and so on. The structure of the game is often assumed to be common knowledge among the players. Dominating strategy A strategy dominates another strategy of a player if it always gives a better payoff to that player, regardless of what the other players are doing. It weakly dominates the other strategy if it is always at least as good. Extensive game An extensive game (or extensive...
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...[pic] Ecole Superieures Libre des Sciences Commerciales Appliquees Doctorate of Business Administration Human Capital Management Paper on Dynamic Capabilities of Firms Presented to: Dr. Sherif Delawar By Mohamed Antably March 2012 Cairo, Egypt. Abstract: From one hand the dynamic capabilities of firms are the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change. Other hand, Human capital ultimate objectives are linking HR practices and knowledge with goals of the firm to achieve and develop Competitive advantages. Accordingly, linking both statements would generate that HC is not only working to achieve the organizations objectives and but also to formalize, maintain and develop the firm dynamic capabilities. HC should also work on sharing and collecting success stories, lessons learnt and implicit individuals' knowledge into institutional explicit knowledge. The competitive advantage of firms is seen as resting on distinctive processes (ways of coordinating and combining which is more difficult among horizontal levels but easy in the vertical levels applying the chain of command), shaped by the firm's asset positions (such as the firm's portfolio of difficult-to-trade knowledge assets and complementary assets), and the evolution path(s) it has adopted or inherited. The importance of path dependencies is ampled...
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...Negotiation Theory Types of Negotiation Table of contents 1. Introduction 2. Negotiation Theory: Foundations and Approaches 2.1. Basic concepts of negotiation 2.2. Negotiation approaches: An overview 2.2.1. Structural approach 2.2.2. Strategic approach 2.2.3. Behavioral approach 2.2.4. Processual approach 2.2.5. Integrative approach 2.3. Summary of approaches 3 Types of Negotiation Negotiation Theory and Practice: A Review of the Literature “major public policies are the outcome of a complex round of negotiation between interests, choices between values and competition between resources… there are no single ‘best’ options for any player in this game, for the ‘best’ outcome depends on what others do and what deals are possible.” (Davis et.al., 1993) 1. INTRODUCTION “Pure” conflict defined as the existence of competing interests between parties in absence of interests that are shared, is an anomaly in international relations where the defining feature of the relationship between states is mutual dependence. Such was the observation of Thomas Schelling, noted international economist, during the height of the Cold War. In the decades that have since transpired, globalizing developments in technology, communications, finance and trade have given rise to a world in which citizens, organizations and governments engage in millions of trans-national interactions on a daily basis. In the modern age, the need...
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...What is game theory? 2 Definitions of games 3 Dominance 4 Nash equilibrium 5 Mixed strategies 6 Extensive games with perfect information 7 Extensive games with imperfect information 8 Zero-sum games and computation 9 Bidding in auctions 10 Further reading 4 6 8 12 17 22 29 33 34 38 This is the draft of an introductory survey of game theory, prepared for the Encyclopedia of Information Systems, Academic Press, to appear in 2002. ∗ 1 Glossary Backward induction Backward induction is a technique to solve a game of perfect information. It first considers the moves that are the last in the game, and determines the best move for the player in each case. Then, taking these as given future actions, it proceeds backwards in time, again determining the best move for the respective player, until the beginning of the game is reached. Common knowledge A fact is common knowledge if all players know it, and know that they all know it, and so on. The structure of the game is often assumed to be common knowledge among the players. Dominating strategy A strategy dominates another strategy of a player if it always gives a better payoff to that player, regardless of what the other players are doing. It weakly dominates the other strategy if it is always at least as good. Extensive game An extensive game (or extensive form game) describes with a tree how a game is played. It depicts the order in which players make moves, and the information each player has at each decision point. Game A game...
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...Strategy Dynamics which he developed to The dynamics of strategy and performance concerns the ‘content’ of strategy – initiatives, choices, policies and decisions adopted in an attempt to improve performance, and the results that arise from these managerial behaviors. Strategy Dynamics focuses on performance over time. Benefits of Strategy Dynamics • The method works for every kind of enterprise - commercial, public-service, or voluntary - as well as to every function within an enterprise. • It is also applicable to not yet existing enterprises, such as new ventures or voluntary initiatives. • The method is strongly evidence-based and rigorous, offering a solid understanding of what causes current performance and confidence in the future performance. • Being evidence-based, it can solve differences of opinion amongst team-members. It also allows each individual, both amongst the management team and in the wider organization beyond, to see where their activity contributes to the whole, and on whom they depend. • Since it highlights exactly where management actions and decisions exert control, it provides clear and specific strategies and action plans, that can be adapted as the future unfolds. • The method provides a solid foundation for methods such as the Balanced Scorecard and Value Based Management, and is a means of integrating other established strategy frameworks and approaches, such as PEST, Core Competence and Value...
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...it steeper, i.e., to convince consumers that their product has no "good substitutes". This is an attempt to lower the price elasticity of demand. Monopolistic Competition will lead to different versions of the product, but higher prices than perfect comeptition. We will get variety, but must pay for to get it. Besides advertising, we should expect give-aways, coupons, warranties, etc. Oligopoly 1. Few sellers 2. Same basic product, but much product differentiation. 3. Firms must price strategically 4. Difficult entry Oligopoly firms behave strategically: They consider not only the response of consumers to their actions, but also the response of other rival firms in the industry. Game Theory: A mathematical approach to strategic behavior. Game theory...
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...Game Theory Game A game is a formal description of a strategic situation. Game Theory Game theory is the formal study of decision-making where several players must make choices that potentially affect the interests of the other players. Mixed Strategy A mixed strategy is an active randomization, with given probabilities, that determines the player’s decision. As a special case, a mixed strategy can be the deterministic choice of one of the given pure strategies. Nash Equilibrium A Nash equilibrium, also called strategic equilibrium, is a list of strategies, one for each player, which has the property that no player can unilaterally change his strategy and get a better payoff. Pay-Off A payoff is a number, also called utility, that reflects the desirability of an outcome to a player, for whatever reason. When the outcome is random, payoffs are usually weighted with their probabilities. The expected payoff incorporates the player’s attitude towards risk. Perfect information A game has perfect information when at any point in time only one player makes a move, and knows all the actions that have been made until then. Player A player is an agent who makes decisions in a game. Rationality A player is said to be rational if he seeks to play in a manner which maximizes his own payoff. It is often assumed that the rationality of all players is common knowledge. Strategic form A game in strategic form, also called normal form, is a compact representation of a game...
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...Game theory is a concept of decision making that considers more elements beyond just benefits minus costs. Specifically, it includes the interaction between participants. In economics, the theory attempts to predict the participants’ optimal decisions. It has found a core place in economic decision-making and policy-making for its inherent ability to predict reactions in resource allocation, business negotiation, and other economic aspects. Game theory is mostly associated with decision-theory and other contexts such as cooperation and negotiations. From its definition, it is evident that the game theory is largely used in the study of the human decision making processes. In psychology, its equivalent is known as the theory of social situations. In economics, however, game theory tends to focus on sets of outcomes known as equilibrium that represent the most rational solutions to each situation. Game theory emanates from the complexity of human interactions; thus, in a situation where an individual is dealing with an inanimate object such as a tree, he or she does not expect the tree to fight back or respond (Leyton-Brown and Shoham 51). The environment can also be considered neutral to what is done to the tree, at least in direct and rational response. In human interactions, however, each action by an actor emanates from a situation and elicits a response. Each actor must thus recognize how his of her interaction with other rational actors works so as to foster cooperation...
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...2 Strategic Management Strategic Management 2012 2012 1- Competitive Advantage When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage. Michael Porter identified two basic types of competitive advantage: * cost advantage * differentiation advantage A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself. Cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation. A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultimately results in superior value creation. The following diagram combines the resource-based and positioning views to illustrate the concept of competitive advantage: A Model of Competitive Advantage Resources | | | | | | Distinctive Competencies | | | Cost Advantage or Differentiation Advantage | | | Value Creation | | Capabilities | | | | | | ...
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...author This is an E-book. It is available in camera copy format with free download from www.patrickmcnutt.com. December 2008 ACKNOWLEDGEMENTS Thank you for reading the E-book and making a contribution to the charity as identified on my web portal. The E-book can be read independently or in conjunction with the Kaelo v2.0 software tool. Some of the arguments are filtered from McNutt (2005): Law, Economics and Antitrust and from books referenced in the E-book. There are indeed numerous references and secondary readings recommended in the E-book. These should be read as well. They will be fully referenced as we continue together to write this E-book on the web. Interesting books on related themes to read are Roberts (2004): The Modern Firm: Games, Strategies and Managers and Nalebuff and Dixit (2008): The Art of Strategy. For my MBA students you will be reading either Baye (2008): Managerial Economics and Business Stratagy or Besanko (2007): Economics of Strategy. For clients using my services, a note of thanks and for management in general who may happen upon this E-book a set of business slides are available as one set called Framework T3 and GEMS which is available from the author. They will appear also on my web page. Please email your comments to me via my web portal at www.patrickmcnutt.com and participate in the Discussion Forums available on that web page. Some of my arguments are distilled from consultancy work and supervision of MBA and PHD students. To all my former MBA...
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