Game theory provided a solution for those problems in its first applications to economics in the 70s and 80s: The objective of this paper is to provide an intuitive approach to game theory in finance by first giving an overview of the basic foundations of game theory, and then providing a survey of some selected applications most relevant to the financial practitioner. The chapter serves to define game theory in the scope of this paper and explores the basic concepts needed to solve games of strategy. Special consideration is given to the incorporation of asymmetric information, as this area of research in game theory is most important to financial applications.
Game theory provided a solution for those problems in its first applications to economics in the 70s and 80s: The objective of this paper is to provide an intuitive approach to game theory in finance by first giving an overview of the basic foundations of game theory, and then providing a survey of some selected applications most relevant to the financial practitioner.
The chapter serves to define game theory in the scope of this paper and explores the basic concepts needed to solve games of strategy.
Special consideration is given to the incorporation of asymmetric information, as this area of research in game theory is most important to financial applications. Hence, it is central to the discussion in the following chapters.
This is shown in chapter 3, which explores how ideas of asymmetric information can be applied in finance. It aims to provide an intuitive approach to the subject by discussing early models of asymmetric information in finance. Building on those models, it demonstrates the usefulness of game theoretic concepts to enhance the economic modeling.
A survey of game theory in finance in chapter 4 integrates the prior chapters by showing the real application value of game theory with important historic and current examples. It provides a discussion of published papers using game theoretic concepts to enhance the understanding of two unresolved issues in finance: To give a complete overview of game theoretic models in finance, it also provides selected examples from other areas, such as the market for corporate control, Initial Public Offerings IPOs and financial intermediation.
However, taking the overall seminar topic into account this paper will mainly focus on corporate finance. Finally, chapter 5 serves the purpose of closing the discussion with some critical remarks and drawing conclusions. Some current areas of research are addressed in order to indicate recent advances in game theory and the application possibilities in finance.
Those interactive situations are called games of strategy, i. Game theory provides a methodology to analyze those games and to predict the outcomes. As most games, in practice, do not provide adequate enforcement mechanisms, non-cooperative game theory is more useful in analyzing managerial decision making.
Therefore, the analysis in this paper will focus on non-cooperative game theory.
In a game with simultaneous moves, also called static game, each player moves without being aware of the moves of the other players. On the contrary, in a game with sequential moves, also called dynamic game, players move in turns. In this type of game players are concerned with the calculation of future consequences, i.
Basically payoffs can be stated in any desired form under the condition that they capture everything the player cares about in the outcome of the game.
The two most important solution techniques for games with simultaneous moves are Nash equilibrium analysis and dominance. Only pure equilibrium strategies, i. The strategies eliminated with this concept are called dominated strategies. From this argument it is obvious that the solution is very powerful: This is done by examining the end of the game and determining which actions the last player will choose equivalent to which ones will not be chosen.Game theory though, gives an insight of what to plan for the future when different situations are influencing a business.
My case study therefore to an extent reconfirms this by analyzing the different strategies that can be made depending upon the system of factors influencing.5/5(1). Bc & MSc project proposals Are you interested in writing your Bachelor or Master thesis in game theory, dynamic systems & chaos theory, or a related topic?
game theory and simulation for practical strategic reasoning. Game-Theoretic Analysis Game-theoretic analysis typically takes at its starting point, most naturally, a description of its subject—the game, a for- Methods for Empirical Game-Theoretic Analysis.
The Impact of the Game Theory in Supply Chain Management Author: Moana Geisler University of Twente P.O. Box , AE Enschede 3rd IBA Bachelor Thesis Conference, July 3rd, , game theory together with the underlying core model and.
1! Game Theory and Real Options: Analysis of Land Value and Strategic Decisions in Real Estate Development by Chun Kit So (Timothy So) Bachelor of Science in . The theory of planned behavior (TPB) is a theory linking beliefs and behavior.
The concept was developed to predict an individual’s intention to engage in a behavior at a specific time and place, including perceived behavioural control.