Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 6

Nash Equilibrium Related Publications

6 The Competitive Newsvendor Game with Overestimated Demand

Authors: Chengli Liu, C. K. M. Lee

Abstract:

The tradition competitive newsvendor game assumes decision makers are rational. However, there are behavioral biases when people make decisions, such as loss aversion, mental accounting and overconfidence. Overestimation of a subject’s own performance is one type of overconfidence. The objective of this research is to analyze the impact of the overestimated demand in the newsvendor competitive game with two players. This study builds a competitive newsvendor game model where newsvendors have private information of their demands, which is overestimated. At the same time, demands of each newsvendor forecasted by a third party institution are available. This research shows that the overestimation leads to demand steal effect, which reduces the competitor’s order quantity. However, the overall supply of the product increases due to overestimation. This study illustrates the boundary condition for the overestimated newsvendor to have the equilibrium order drop due to the demand steal effect from the other newsvendor. A newsvendor who has higher critical fractile will see its equilibrium order decrease with the drop of estimation level from the other newsvendor.

Keywords: Nash Equilibrium, bias, overestimation, competitive newsvendor

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5 Playing Games with Genetic Algorithms: Application on Price-QoS Competition in Telecommunications Market

Authors: Belaid Bouikhalene, M’hamed Outanoute, Mohamed Baslam

Abstract:

The customers use the best compromise criterion between price and quality of service (QoS) to select or change their Service Provider (SP). The SPs share the same market and are competing to attract more customers to gain more profit. Due to the divergence of SPs interests, we believe that this situation is a non-cooperative game of price and QoS. The game converges to an equilibrium position known Nash Equilibrium (NE). In this work, we formulate a game theoretic framework for the dynamical behaviors of SPs. We use Genetic Algorithms (GAs) to find the price and QoS strategies that maximize the profit for each SP and illustrate the corresponding strategy in NE. In order to quantify how this NE point is performant, we perform a detailed analysis of the price of anarchy induced by the NE solution. Finally, we provide an extensive numerical study to point out the importance of considering price and QoS as a joint decision parameter.

Keywords: Learning, Genetic Algorithms, QoS, Nash Equilibrium, Pricing, Market share game, Price of anarchy

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4 Survey on Strategic Games and Decision Making

Authors: S. Madhavi, K. Baala Srinivas, G. Bharath, R. K. Indhuja, M. Kowser Chandini

Abstract:

Game theory is the study of how people interact and make decisions to handle competitive situations. It has mainly been developed to study decision making in complex situations. Humans routinely alter their behaviour in response to changes in their social and physical environment. As a consequence, the outcomes of decisions that depend on the behaviour of multiple decision makers are difficult to predict and require highly adaptive decision-making strategies. In addition to the decision makers may have preferences regarding consequences to other individuals and choose their actions to improve or reduce the well-being of others. Nash equilibrium is a fundamental concept in the theory of games and the most widely used method of predicting the outcome of a strategic interaction in the social sciences. A Nash Equilibrium exists when there is no unilateral profitable deviation from any of the players involved. On the other hand, no player in the game would take a different action as long as every other player remains the same.

Keywords: Game theory, Nash Equilibrium, Rules of Dominance

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3 Complex Dynamics of Bertrand Duopoly Games with Bounded Rationality

Authors: Jixiang Zhang, Guocheng Wang

Abstract:

A dynamic of Bertrand duopoly game is analyzed, where players use different production methods and choose their prices with bounded rationality. The equilibriums of the corresponding discrete dynamical systems are investigated. The stability conditions of Nash equilibrium under a local adjustment process are studied. The stability conditions of Nash equilibrium under a local adjustment process are studied. The stability of Nash equilibrium, as some parameters of the model are varied, gives rise to complex dynamics such as cycles of higher order and chaos. On this basis, we discover that an increase of adjustment speed of bounded rational player can make Bertrand market sink into the chaotic state. Finally, the complex dynamics, bifurcations and chaos are displayed by numerical simulation.

Keywords: Nash Equilibrium, Bertrand duopoly model, discrete dynamical system, heterogeneous expectations

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2 Multi-Stakeholder Road Pricing Game: Solution Concepts

Authors: Anthony E. Ohazulike, Georg Still, Walter Kern, Eric C. van Berkum

Abstract:

A road pricing game is a game where various stakeholders and/or regions with different (and usually conflicting) objectives compete for toll setting in a given transportation network to satisfy their individual objectives. We investigate some classical game theoretical solution concepts for the road pricing game. We establish results for the road pricing game so that stakeholders and/or regions playing such a game will beforehand know what is obtainable. This will save time and argument, and above all, get rid of the feelings of unfairness among the competing actors and road users. Among the classical solution concepts we investigate is Nash equilibrium. In particular, we show that no pure Nash equilibrium exists among the actors, and further illustrate that even “mixed Nash equilibrium" may not be achievable in the road pricing game. The paper also demonstrates the type of coalitions that are not only reachable, but also stable and profitable for the actors involved.

Keywords: Nash Equilibrium, Road pricing game, Equilibrium problem with equilibrium constraint (EPEC), Game stability

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1 Determination of Sequential Best Replies in N-player Games by Genetic Algorithms

Authors: Mattheos K. Protopapas, Elias B. Kosmatopoulos

Abstract:

An iterative algorithm is proposed and tested in Cournot Game models, which is based on the convergence of sequential best responses and the utilization of a genetic algorithm for determining each player-s best response to a given strategy profile of its opponents. An extra outer loop is used, to address the problem of finite accuracy, which is inherent in genetic algorithms, since the set of feasible values in such an algorithm is finite. The algorithm is tested in five Cournot models, three of which have convergent best replies sequence, one with divergent sequential best replies and one with “local NE traps"[14], where classical local search algorithms fail to identify the Nash Equilibrium. After a series of simulations, we conclude that the algorithm proposed converges to the Nash Equilibrium, with any level of accuracy needed, in all but the case where the sequential best replies process diverges.

Keywords: Genetic Algorithms, Nash Equilibrium, Best response, Cournot oligopoly

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