Category Archives: Game Theory

This is a part of my Game Theory Series. I have several equity analyses in the works, but it’s fun to spin the brain in a different direction. Please let me know if you have any questions or comments!

There are mixed views about the President, but he tweets enough content to fuel several blog posts. There are mixed reviews on the political system, like always, and this is not a political blog. This is a finance blog.

Continue reading “A Game Theory Application: Is Donald Trump Actually Crazy?”

Let’s say that there are three fishermen, and each day they individually decide how many boats to send out to catch fish in the local lake.

A fisherman can send out one or two boats, and the daily cost of a boat is $15. The more boats sent out, the more fish are caught. However, since there are only so many fish to be caught on a given day, the more boats another fisherman sends out, the fewer fish the remaining fishermen can catch. Things need to be shared, but not everyone wants to share. Overexploitation is very real.

Continue reading “Grim Trigger Strategy: How Many Boats Should We Send?”

Consider the infinitely repeated version of the symmetric two-player stage game below. The first number in a cell is player 1’s single-period payoff. Suppose the stage game is repeated three times and each player’s payoff is the sum of the single-period payoffs. Assume that past actions are common knowledge.

Continue reading “How Do You Induce Cooperation?”

Consider the infinitely repeated version of the symmetric two-player stage game in the following figure. The first number in a cell is player 1’s single- period payoff. The second number in a cell is player 2’s single period payoff.

Continue reading “Infinite Games: Comparing the Combination of The Value of Defecting + The Value of Loss”