MATHEMATICS
P.5
Outside of oligopolistic markets
The Future
Game theory exists anywhere in which competition or
interdependence and choice exists, even in
macroeconomics.
A final observation is much more significant. The
Homo Economicus is a being which acts rationally and
in self-interest consistently, but this is contrary to basic
reasoning - both competition and cooperation are
needed for the most beneficial outcome as game
theory suggests.
Mutually Assured Destruction (MAD) occurs where two
nations have the capacity to destroy each other. This
occurred in the Cold War between USSR and USA
where both governments suffered opportunity costs of a
choice;
1) Spend money stockpiling nuclear weapons in case of
imminent attack of the other nation.
Recent studies at the Michigan State University by
Christoph Adami supports this.
His studies found that although acting in self-interest
may be advantageous in terms of evolutionary biology
in the short run, soon game theory players end up in a
society where the most successful beings, and
therefore most common by natural selection, are all
selfish. This leads to the Homo Economicus ideology
becoming ineffective.
2) Spend money on improving the social welfare of the
economy and its people.
However if one does not stockpile weapons and the
other does, they are left vulnerable to utter destruction.
Thus game theory produces the same result - both
nations stockpile weapons, international relations are
damaged and everyone is collectively worse off.
Adami, therefore, came to the enviable conclusion that
“self-interest is not evolutionarily sustainable.” So
should we consider this whilst examining the future of
oligopolistic markets?