 |
| Microeconomics in a Nutshell |
The Idea Of Promoting Non-zero Sum Games: How Winning With Others Helps You Win Bigger
Game theory is a branch of both Economics and Mathematics.
When you start considering
- your opponents
- possible action choices and respective outcomes of actions of both you and your opponents
The field has found applications in areas as diverse as Artificial Intelligence, Evolutionary BIology and Politics.
A game where a player wins 5 points and his opponent loses 5 points is a zero-sum game.
5+(-5)=0.
On the other hand, in a non zero-sum game, the outcome is not zero.
For example, if a player wins 5 points and his opponent wins 2 points, the overall outcome is 5 + 2 = 7. So here we have a win-win, non-zero sum game - both wins.
Non-zero sum game doesn't mean that you have to lose in order to make others win. The idea is not to think solely in terms of your profit but to develop business plans so that you win bigger by including others as "co-winners". Here are some practical examples.
- Lets consider Google's Android Platform. Google could develop a mobile operating system and develop all the apps themselves. If that happened then we would have far less apps and more importantly, less innovative apps. But Android is an open platform. Anyone can develop apps for the Android platform. So in this case, Google didn't want to win only by themselves. Google saw you - the app developer - as a co-winner. That is the reason why we have so many App developers making great money. Of course, Google is winning. Google is taking 30% cut. And Google is winning bigger by helping you win. As more apps are available, Android Phone / Tablet sell is on the rise. So just as Google and App Developers are winning, companies who advertise on Android are reaching more customers through the apps and winning bigger. And last but not least, don't forget the customers whose lives are getting easier and richer with all these apps that app developers are developing. They are winning too!
- As the economic condition of the developing and undeveloped nations rises, their purchasing power rises, which in turn creates opportunities for developed countries in our increasingly interconnected and interdependent world. Developed countries have more exports and imports among themselves. Why not plan for a future where all the countries have more to export and more to import? Won’t the citizens have a better and richer life?
- Google and Facebook have taken initiatives to increase Internet penetration, targeting “the next billion” or so they say, which in turn increases the number of users of their services. So here is the win-win scenario.
- Users learn more, communicate better, use better tools [apps] and as a result earn more + living condition goes up.
- Marketers, App developers reach more of their customers and sell more of their products.
- Google and / or Facebook get more cut.
- Taking initiative to reduce Climate change should be win-win.
- Here is how mobile
- fights poverty
- bypasses poor infrastructure which could have been a roadblock to development
- makes companies get rich.
- Economics: The science of choice.
- Utility: Satisfaction. Consumers consider utility value to choose among different goods and services. Rational agent: maximizes utility (happiness, fulfillment, satisfaction).
Diminishing marginal utility ensures that no good or service is consumed too much by a single agent.
- Behavioral Economics: Utility function differs according to personality, culture, society etc. (e.g., gamification: social status, fun from continuous feedback.) Cognitive biases.
- Operations Research: Payoff may be far in the future, requires sequence of steps. (Behavioral: how much do people think?) Limited rationality; satisficing.
- Study - Welfare Economics. Adam Smith - “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”
- Competition vs Co-operation (Competitive spirit is an essential impetus for individual growth. {Mastery of life and a sense of being in control} There is scarcity - compete.)
- Perfectly competitive market: Same product market – competition – price goes down, more innovation – more sales. {e.g., smart-phone}
Economics Research Topics
- Win-win, Non zero-sum / Positive sum games from an Economist’s point of view. How to apply win-win to different sectors. Mechanism Design.
- Theoretical framework for Social Business (Entrepreneurship). (Multi-dimensional nature of human beings can be integrated into the Utility theory.)
- Market-Production-Financial Market-GDP-Econometrics
References
No comments:
Post a Comment