Monday, October 20, 2008

Resource Management and Game Theory

Today International Financiers are hoarding the worlds resources by tying up liquidity thereby precipitating a global depression and planning on buying up the devalued assets at the nadir of the crisis. My question is why can't their fraudulent system become a legitimate system of assessing the earths resources and giving everyone on earth a chance to claim their resources? According to game theory I believe resource management can become legitimate.
Game theory is a mathematical method to assess interactions and the cost or benefit from situations. It is widely used in economics to understand the outcomes from market forces.
John Nash elucidated an equilibrium that ensures everyone in the game cannot gain anymore benefit from interactions.
Here's an explanation of the nash equilibrium from game theory:
http://en.wikipedia.org/wiki/Nash_equilibrium
a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy (i.e., by changing unilaterally). If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium. In other words, to be a Nash equilibrium, each player must answer negatively to the question: "Knowing the strategies of the other players, and treating the strategies of the other players as set in stone, can I benefit by changing my strategy?"
Stated simply, Amy and Bill are in Nash equilibrium if Amy is making the best decision she can, taking into account Bill's decision, and Bill is making the best decision he can, taking into account Amy's decision. Likewise, many players are in Nash equilibrium if each one is making the best decision that they can, taking into account the decisions of the others. However, Nash equilibrium does not necessarily mean the best cumulative payoff for all the players involved; in many cases all the players might improve their payoffs if they could somehow agree on strategies different from the Nash equilibrium (e.g. competing businessmen forming a cartel in order to increase their profits).

According to this theory people can all benefit if they either know they cannot change their strategy to win or if they form collaborations that force unequal circumstances on the majority of players. In today's society there is a cartel of international financiers that own all of the resources and therefore there is a lopsided equilibrium. Even though a select few own most of the resources no one in "the game" can benefit more because everyone in the system knows that they can't change their strategy to win. What would happen if those resources were monitored and distributed not by a select few but by every human being on the earth? According to game theory there would also be equilibrium in the market.

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