Question

passage require analysis and breakdown

Using the Topic Material "Game Theory," discuss your perspective on the use of game theory. How do "Nash equilibrium" and the idea of one "player" impacting another "player" within an organization affect the economic decisions and growth of an organization?

The use of Game Theory happens continuously throughout our daily lives, as we make decisions. Anytime we make a decision that affects another player (person or group), this is Game Theory in play. The essence of a game is the interdependence of player strategies. There are two distinct types of strategic interdependence: sequential and simultaneous. In the former, the players move in sequence, each aware of the others’ previous actions. In the latter the players act at the same time, each ignorant of the others’ actions (Dixit & Nalebuff, n.d., para. 4). With the Nash Equilibrium, the players look for a set of choices, one for each player, such that each person’s strategy is best for him when all others are playing their stipulated best strategies. In other words, each picks his best response to what the others do.

Within an organization, there are many players and games happening simultaneously. I work in a small rural hospital, our ED only has 13 beds. Our inpatient unit holds 25 patients, and we have six Family birthing rooms. We all work together between our units when we are busy helping the throughput of patients. Typically, the ED is the busiest unit, and we utilize staff from other departments when we “flex.” The players in this game are the different units, ED and the other unit that has a potential staff member to lend. The ED wins if we get that staff member, and the floor loses. If the staff member keeps the employee, the ED loses and the floor wins.

This “game” affects more than the unit that wins or loses. If the ED does not get an extra staff member in the time of flex, our wait time increases, patient satisfaction decreases, and potential safety concerns are elevated due to patient acuity and safe staffing. If the floor wins and keeps its staff members, they have high satisfaction rates, adequate staffing ratios and potentially safer care for their patients. This is well known in our facility, and since we are so small, compared to many other hospitals, we all work together to ensure the best care for our patients. To ensure we continue to work this way between different units, I have seen the rules recommended in our text at play in this repeated game; Be nice, be easily provoked, be forgiving, don’t be envious and be clear (Froeb, McCann, Shor, & Ward, 2016, p. 200). When we follow these rules, it works much better for everyone, even though there is a “loser” in each play of the game because we are all working toward the same collective goal.

Answer 1

Answer:Game theory explains the importance on descision making from a broad view. It says that one should not make an descision in isolation but rather it should consider other participants or competitors descision in the industry/market before making a descision.

Nash equilibrium comes out from the game theory itself and it says that descision of any one player which has competition from other participant, that player will not benefit from making any descision in isolation as the impact of his descision will also been seen by other competitors and hence will not benefit that player.

With the below example it will explain how does it affect the descision and growth of an organisation:

Lets say there are 2 companies A &B who are producing water heaters in equal quantity annually. Assuming both are making annual profit of $5m. now lets assume that Co A decides to double the manufacturing quantity and reduce the per unit price and it expects its annual profits to shoot uo to $9m annually. But with this descision Co B will also start producing more and reduce its per unit price and as a result of this there will be excess supply in the market and the prices would get reduced and so will the profit margin which would come below the exisitng $5m annually. Hence its not feasible for Co A to make desicions in isolation.