Author Question: Although there are many examples of game theory in the real world, how well do you think specifics ... (Read 133 times)

shofmannx20 · **on:** Jun 29, 2018

Although there are many examples of game theory in the real world, how well do you think specifics like payoff matrices, Nash equilibrium, and dominant strategies translate to reality?

What will be an ideal response?

Question 2

Define the exchange rate.

What will be an ideal response?

mjenn52 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

It is difficult to assess the relevance of game theory to real-world problems. We may not always know the payoffs facing players in the game. In real-world situations, the payoffs are determined by the attitudes and feelings of individuals as well as by their monetary returns; emotional payoffs are difficult to observe. Even with dominant strategies, the same problem exists. Game theory often abstracts from important details. For example, in many strategic environments one player may be more cunning, wiser, or more experienced than another.

Answer to Question 2

The exchange rate is the ratio at which two currencies are traded. It is the price of one currency in terms of another.