Game of Strategy in Social Science

The Prisoner’s Dilemma.

Game theory is a branch of applied mathematics that is used in the social sciences, most notably in economics, as well as in biology, engineering, political science, international relations, computer science, and philosophy.
Game theory attempts to mathematically capture behavior in strategic situations, in which an individual’s success in making choices depends on the choices of others. While initially developed to analyze competitions in which one individual does better at another’s expense (zero sum games), it has been expanded to treat a wide class of interactions, which are classified according to several criteria. Today, “game theory is a sort of umbrella or ‘unified field’ theory for the rational side of social science, where ’social’ is interpreted broadly, to include human as well as non-human players (computers, animals, plants)” (Aumann 1987).

Traditional applications of game theory attempt to find equilibrium in these games. In an equilibrium, each player of the game has adopted a strategy that they are unlikely to change. Many equilibrium concepts have been developed (most famously the Nash equilibrium) in an attempt to capture this idea. These equilibrium concepts are motivated differently depending on the field of application, although they often overlap or coincide. This methodology is not without criticism, and debates continue over the appropriateness of particular equilibrium concepts, the appropriateness of equilibria altogether, and the usefulness of mathematical models more generally.

Nash equilibrium

In game theory, Nash equilibrium (named after John Forbes Nash, who proposed it) is a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy unilaterally. If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium.

The Prisoner’s Dilemma is the best-known game of strategy in social science (Dixit & Nalebuff, n.d.). This dilemma represents a common problem in achieving cooperation in any number of social settings. The dilemma “illustrates the tendency toward noncooperative behavior, despite general advantage from cooperation” (Lee & McKenzie, 2006, p.233). The Prisoner’s Dilemma classic game scenario as well as several related real world situations is presented below.

The prisoners’ dilemma is a well-known problem in game theory.

In a classical game, two people are apprehended as suspects for a major crime. They are separated from each other and interrogated. There are two options available to each of the two suspects. Each can either confess, thereby implicating the other, or keep silent. No matter what the other suspect does, each can improve his own position by confessing. If the other confesses, then one had better do the same to avoid the especially harsh sentence that awaits a recalcitrant holdout. If the other keeps silent, then one can obtain the favorable treatment accorded a state’s witness by confessing. Thus, confession is the dominant strategy for each. But when both confess, the outcome is worse for both than when both keep silent (Dixit & Nalebuff). However, each prisoner chooses to defect even though both would be better off by cooperating, hence the dilemma. In the classic form of this game, no matter what the other player does, one player will always gain a greater payoff by playing defect. Since in any situation playing defect is more beneficial than cooperating, all players will play defect, all things being equal .However, it should be noted that multiple repetition of the game will lead to different results (“Prisoner’s Dilemma”, n.d.).

The Prisoner’s Dilemma has applications in business and economics.

Example 1

Suppose there are two firms, A and B, selling similar products. Each has to decide on a pricing strategy. Both firms are better off when they both charge a high price; each makes a profit of $10 million per month. However, if one firm cheats and sells its product for lower price, it wins a lot of customers from the competitor. Assume its profit rises to $12 million, and the competitor’s profit fall to $7 million. If both set low prices, the profit of each is 9 million. In this situation, the low price strategy is like the prisoner’s confession, and the high price strategy equals to keeping silent. If we call the low price strategy cheating, and the latter cooperation, then cheating is each firm’s dominant strategy. However, the result when both cheat is worse for each than if both firms were to cooperate (Dixit & Nalebuff, n.d.).

Example 2

Lee and McKenzie (2006) gave an example of a Prisoner’s Dilemma game with respect to the healthcare decisions we make. An employer typically buys insurance policies with low deductibles. This feature of insurance policy has encouraged excessive use of healthcare services. This, in turn, drives employee’s insurance premium up. As a result, some workers can not afford to have the insurance anymore. We are in a Prisoner’s Dilemma with respect to our healthcare decisions. Collectively, we would be better off if we all moderated the amount of health care services. But because of insurance and government subsidies, it is in the interest of each of us to ignore most of the cost when we choose how much healthcare to demand (Lee & McKenzie, 2006).

Example 3

An example of a real world situation we have been observing for a number of years is the use of performance-drugs in professional sports, particularly those that are forbidden by the organizations that regulate competitions. For example, the 2007 Tour de France was rocked by a series of doping scandals.

• Pre-race favorite Alexander Vinokourov (Kazakhstan) tested positive for blood doping after winning the Stage 13 .The incident led his  Astana Team  to quit the Tour after Stage 15.
• Cristian Moreni (Italy) tested positive for testosterone after Stage 11. When his positive test was announced after Stage 16, his entire  Cofidis (cycling team) team pulled out of the Tour. Moreni acknowledged his offense, choosing not to have his B sample tested. He was detained by French police, who searched the hotel rooms where the Cofidis team was to spend the evening after Stage 16.
• After the end of the Tour, it was revealed that Spanish rider Iban Mayo  tested positive for EPO late in the race. (“Doping in Sport”)

Doping is considered to be unethical by most international sports organizations and especially the International Olympic Committee “…because of the health threat of performance-enhancing drugs, the equality of opportunity of the athletes and the exemplary effect of “clean” (doping-free) sports in the public” (“Doping in Sport”). Moreover, there are disciplinary actions employed against athletes tested positively on the doping drugs usage. However, using drugs in professional sports continues because of the strong incentive. It is a classic Prisoner’s Dilemma (Scheiree n.d.). To illustrate, Schneier (2006) gives the following example:

Suppose there are two competing athletes: Alice and Bob. Both Alice and Bob have to individually decide if they are going to take drugs or not. Imagine Alice evaluating her two options: “If Bob doesn’t take any drugs,” she thinks, “then it will be in my best interest to take them. They will give me a performance edge against Bob. I have a better chance of winning. Similarly, if Bob takes drugs, it’s also in my interest to agree to take them. At least that way Bob won’t have an advantage over me. So even though I have no control over what Bob chooses to do, taking drugs gives me the better outcome, regardless of his action.” Unfortunately, Bob goes through exactly the same analysis.

As a result, both athletes cheat, taking performance-enhancing drugs and neither has the advantage over the other. If they could trust each other, they could abstain from taking the drugs and maintain the same non-advantage status. They both would be better off since they would escape any legal or physical danger. But competing athletes can’t trust each other, and everyone feels he has to dope in order to compete (Schneier, 2006).

As Lee and McKenzie (2006) have pointed out, “Overcoming Prisoner’s Dilemmas is a pervasive problem in the development of social and management policies” (p.41). Studying principles of the game theory and its application to business will assist managers in choosing the most effective business solutions.

References

Dixit, A. & Nalebuff, B. Prisoners’ dilemma. The Library of Economics and Liberty. Retrieved November 8, 2007 from http://www.econlib.org/Library/Enc/PrisonersDilemma.html

Doping in sport. Wikipedia. Retrieved November 7, 2007 from http://en.wikipedia.org/wiki/Doping_(sport)

Lee, D.R. & McKenzie, R. B. (2006). Microeconomics for MBAs. New York.

Cambridge University Press.

Prisoner’s dilemma. Wikipedia. Retrieved November 8, 2007 from http://en.wikipedia.org/wiki/Prisoner’s_dilemma

Schneier, B. (2006). Drugs: Sports’ Prisoner’s Dilemma. Retrieved November 8, 2007 from

http://www.wired.com/politics/security/commentary/securitymatters/2006/08/71566

Economics and its Effect on Business. This is economics and history as they are meant to be: fascinating, informative, and motivating.

Economics and its Effect on Business and on Human Resources and Marketing

In short: Economics is the study of how people choose to use resources.

Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, “management of a household, administration”) from οἶκος (oikos, “house”) + νόμος (nomos, “custom” or “law”), hence “rules of the house(hold)”.[1] Current economic models developed out of the broader field of political economy in the late 19th century, owing to a desire to use an empirical approach more akin to the physical sciences

What is Money?

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war, and science. The expanding domain of economics in the social sciences has been described as economic imperialism

Economics is the study of how society manages its scarce recourses (Mankiw, 2004, p.4). Since all businesses are part of the economy, the way economy works has a major influence on all functional areas of business. This paper shows how changes in economic activity and inflation affect business as a whole and its Human Resources and Marketing functional areas in particular (“Level 2 Business,” n.d.).

Economic activity changes due to different reasons. Rate of growth at which economic activity changes is called economic growth (“Level 2 Business,” n.d.).  At the time of slow economic growth or recession, people loose their jobs, unemployment level goes up, and income level decreases. As a result, demand for goods and services falls and sales slow down.  Businesses have to consider accommodating to such changes in demand. To illustrate, in order to adjust to a falling demand, a company tries to cut prices to increase sales while suffering lower revenue and decreased profit margin .Thus, the firm might decide to cut back on production and/or reduce number of employees (“Level 2 Business,” n.d.). At the time of economic growth demand and sales increase, unemployment falls, and production goes up as businesses try to cope with the increased demand, Businesses try to accommodate these changes. For example, in order to keep up with the growing demand and increase in production level, firms might reconsider changes in the use of production equipment, changes in equipment or production facilities,  amount of  recourses needed (“Economics Basic,” n.d.  Time and Supply section, para. 1).  All of the above might bring production costs up. This, in turn, brings up prices for goods and services (“Level 2 Business,” n.d.). To control growing cost of production, businesses might decide to cut waste, to change the way people work, to use new technology, or to reconsider number of staff they employ.

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Money, Banking and the Federal Reserve

(45minutes video documentary ..we might not agree with some of the opinions but it worth to watch…

This is economics and history as they are meant to be: fascinating, informative, and motivating.
Thomas Jefferson and Andrew Jackson understood “The Monster”. But to most Americans today, Federal Reserve is just a name on the dollar bill. They have no idea of what the central bank does to the economy, or to their own economic lives; of how and why it was founded and operates; or of the sound money and banking that could end the statism, inflation, and business cycles that the Fed generates.

Dedicated to Murray N. Rothbard, steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.

How an Economy Grows and Why It Doesn’t (by Irwin Schiff)

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Inflation is a rise in a general price level over a period of time (Mankiw, 2004, p.12). For example, prices for goods and services, prices for raw materials, and prices for individual as well as firms insurance go up. It becomes difficult for businesses to plan ahead since inflation affects not only the amount received from for sales but also the prices of input.  Businesses might start paying higher salaries to their employee to keep up with inflation. In addition, prices of raw material go up.

As prices of input increase, a cost of production goes up causing an increase in prices. If wages do not rise by the same level as inflation, spending power is affected, savings level can also fall. This leads to a decrease in income and decrease in demand and sales follow. Again, firms take action in order to accommodate these changes (“Level 2 Business,” n.d.).

Motivators More Powerful than Money?

What Is Economics?

Human Resources (HR) and Marketing areas of business are affected by changes in economic activity and inflation. Because Human Resources functional area is responsible for recruitment, retention, training, conditions of work, health and safety, and worker representation, it has to consider rising or falling unemployment that results from changes in economic activity or inflation. When unemployment rate is rising, the HR department must deal with issues associated with laying off firm’s employees, for example. The department can take necessary actions to make this process less painful and less problematic as possible for both the company and its employees. For example, it assists employees to understand and adjust to a new situation. In addition, Human Resources may provide job training to the remaining employees in order to meet changes in their new or expanded job duties.

During increase in economic growth or inflation,   when the level of unemployment is low and firms are in need of more workers, it becomes difficult to recruit necessary employees. The department has to make additional efforts in recruitment in order to get labor. Human Resources is also responsible for retention of company’s labor. The department usually plans for and takes actions that will help a firm to retain its workers. For example, they can provide develop and foster programs aimed at increasing employee satisfaction. The department often considers a possible pay raise to hire new or retain its existing labor force.
Because Marketing department is responsible for market research, market analysis, market strategy, and sales, it pays particular attention to the economic situation to see how current or future demand, prices and sales are going to be affected. This helps to determine actions a firm should take or plan on taking in order to succeed or, at least, to stay in business. For example, observing slow economic growth or inflation when demand and sales are falling, the department will try to cut production and selling costs (“Level 2 Business,” n.d).

Changes in Economic Activity

Moreover, it may reconsider and adjust projected sales and prices as well as company’s marketing strategy.  In the time of economic growth when demand and sales increase, unemployment falls, and production goes up, Marketing must consider how to accommodate these changes and adjust production and sales strategy as well as prices accordingly.
In addition, knowledge of current or anticipated economic situation is essential when planning for a new product. Based on the discovery and recommendations of the Marketing department, other departments can properly plan or adjust their work.

To summarize, all functional areas of business including Marketing and Human Resources are affected by changes in economic activity, changes in inflation rate, and other possible changes in economics. These departments as well as entire company should recognize the impact of current and possible future economic situation on business, and take actions in order to accommodate these changes.

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References

Economics Basics: Demand and Supply. Investopedia: A Forbes Media Company

Retrieved September 3, 2007 from http://www.imvestopedia.com/university/economics/economics3.asp

Level 2 Business and economics: The Economic context of business. Level 2

Business and Economics Education. Retrieved September 3, 2007 from

http://www.bized.co.uk/educators/level2/external/lesson/context1.htm

Mankiw, G. (2004). Principles of Economics. Mason, OH: Thomson South-Western

What is National Park? National Parks History. List of National Parks in USA

What are the National Parks?

IUCN, International Union for Conservation of Nature, helps the world find pragmatic solutions to our most pressing environment and development challenges.
In 1969 the IUCN (International Union for the Conservation of Nature and Natural Resources) declared a national park to be a relatively large area with particular defining characteristics.

A national park was deemed to be a place where:

• one or several ecosystems are not materially altered by human exploitation and occupation, where plant and animal species, geomorphological sites and habitats are of special scientific, educative and recreative interest or which contain a natural landscape of great beauty.
• the highest competent authority of the country has taken steps to prevent or eliminate as soon as possible exploitation or occupation in the whole area and to enforce effectively the respect of ecological, geomorphological or aesthetic features which have led to its establishment.
• visitors are allowed to enter, under special conditions, for inspirational, educative, cultural and recreation purposes.

In 1971 these criteria were further expanded upon leading to more clear and defined benchmarks to evaluate a national park. These include:

• a minimum size of 1,000 hectares within zones in which protection of nature takes precedence
• statutory legal protection
• a budget and staff sufficient to provide sufficient effective protection
• prohibition of exploitation of natural resources (including the development of dams) qualified by such activities as sport, fishing, the need for management, facilities, etc.

Watch a preview of The National Parks: America’s Best Idea

View more film clips

Filmmaker Ken Burns and his longtime colleague Dayton Duncan take us on a behind the scenes tour of their new PBS series, The National Parks: America’s Best Idea. The team explains why they chose the parks as their subject, as well as describing their five-year journey through research, scripting, filming and editing the series. Their story is illustrated by rare footage of the film crew at work shooting in the parks, as well as excerpts from the finished film.

PBS Previews: The National Parks Filmed over the course of more than six years at some of nature’s most spectacular locales — from Acadia to Yosemite, Yellowstone to the Grand Canyon, the Everglades of Florida to the Gates of the Arctic in Alaska — The National Parks: America’s Best Idea is nonetheless a story of people: people from every conceivable background — rich and poor; famous and unknown; soldiers and scientists; natives and newcomers; idealists, artists and entrepreneurs; people who were willing to devote themselves to saving some precious portion of the land they loved, and in doing so reminded their fellow citizens of the full meaning of democracy. It is a story full of struggle and conflict, high ideals and crass opportunism, stirring adventure and enduring inspiration – set against the most breathtaking backdrops imaginable.

National Parks History

In 1810, the English poet William Wordsworth described the Lake District as a "sort of national property in which every man has a right and interest who has an eye to perceive and a heart to enjoy". The painter George Catlin, in his travels through the American West, wrote in 1832 that the Native Americans in the United States might be preserved "by some great protecting policy of government . . . in a magnificent park . . . A nation’s park, containing man and beast, in all the wild and freshness of their nature’s beauty!" Similar ideas were expressed in other countries—in Sweden, for instance, the Finnish-born Baron Adolf Erik Nordenskiöld made such a proposition in 1880.

The Scottish-American naturalist John Muir was inspirational in the foundation of national parks, anticipating many ideas of conservationism, environmentalism, and the animal rights movement.

The first effort by any government to set aside such protected lands was in the United States, on April 20, 1832, when President Andrew Jackson signed legislation to set aside four sections of land around what is now Hot Springs, Arkansas to protect the natural, thermal springs and adjoining mountainsides for the future disposal of the US government. It was known as the Hot Springs Reservation. However no legal authority was established and federal control of the area was not clearly established until 1877.

The next effort by any government to set aside such protected lands was, again, in the United States, when President Abraham Lincoln signed an Act of Congress on June 30, 1864, ceding the Yosemite Valley and the Mariposa Grove of Giant Sequoias (later becoming the Yosemite National Park) to the state of :

“

The said State shall accept this grant upon the express conditions that the premises shall be held for public use, resort, and recreation; shall be inalienable for all time.

”

In 1872, Yellowstone National Park was established as arguably the world’s first truly national park. When news of the natural wonders of the Yellowstone were first promulgated, the land was part of a federally governed territory. Unlike Yosemite, there was no state government that could assume stewardship of the land, so the federal government took on direct responsibility for the park, a process formally completed in October 1, 1890—the official first National park of the United States. It took the combined effort and interest of conservationists, politicians and especially businesses—namely, the Northern Pacific Railroad, whose route through Montana would greatly benefit by the creation of this new tourist attraction—to ensure the passage of that landmark enabling legislation by the United States Congress to create Yellowstone National Park. Theodore Roosevelt, already an active campaigner and so influential as good stump speakers were highly necessary in the pre-telecommunications era, was highly influential in convincing fellow Republicans and big business to back the bill.

Yosemite Valley, Yosemite National Park, California, USA.

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The "dean of western writers", American Pulitzer prize-winning author Wallace Stegner, has written that national parks are ‘America’s best idea,’—a departure from the royal preserves that Old World sovereigns enjoyed for themselves—inherently democratic, open to all, "they reflect us at our best, not our worst." Even with the creation of Yellowstone, Yosemite, and nearly 37 other national parks and monuments, another 44 years passed before an agency was created in the United States to administer these units in a comprehensive way — the U.S.National Park Service (NPS). Businessman Stephen Mather and his journalist partner Robert Sterling Yard pushed hardest for the creation of the NPS, writing then-Secretary of the Interior Franklin Knight Lane about such a need and spearheading a large publicity campaign for their movement. Lane invited Mather to come to Washington, DC to work with him to draft and see passage of the NPS Organic Act, which was approved by Congress and signed into law on August 25, 1916. Of the 391 sites managed by the National Park Service of the United States, only 58 carry the designation of National Park.

[http://www.youtube.com/watch?v=nQ7rFA4TQmA]

Following the idea established in Yellowstone there soon followed parks in other nations. In Australia, the Royal National Park was established just south of Sydney in 1879. Rocky Mountain National Park became Canada’s first national park in 1885. New Zealand had its first national park in 1887.

In Europe the first national parks were a set of nine parks in in 1909; Europe has some 370 national parks as of this writing. In 1926, the government of South Africa designated Kruger National Park as the nation’s first national park. After, national parks were founded all over the world. The Vanoise National Park in the Alps was the first French national park, created in 1963 after public mobilization against a touristic project.

[http://www.youtube.com/watch?v=HBb9DoziY7M]

List of United States National Parks by State

This is a list of United States National Parks by state. Some states lack a national park; others have many. Two territories have national parks, and are included on this list. Some parks encompass land in more than one state and are listed more than once. Parks vary greatly in size, but the largest are generally in the West and Alaska, where large blocks of undeveloped and government-owned land existed.

State	National Parks	Year Created	Area (mi²)	Area (km²)
Alaska	Denali	1917	9,492	24,585
Alaska	Gates of the Arctic	1980	13,238	39,460
Alaska	Glacier Bay	1980	5,130	13,287
Alaska	Katmai	1980	5,288	13,696
Alaska	Kenai Fjords	1980	1,094	2,833
Alaska	Kobuk Valley	1980	2,609	6,757
Alaska	Lake Clark	1980	6,297	16,308
Alaska	Wrangell – St Elias	1980	20,587	53,321
American Samoa	American Samoa	1988	14	36
Arizona	Grand Canyon	1919	1,902	4,927
Arizona	Petrified Forest	1962	341	885
Arizona	Saguaro	1994	143	370
Arkansas	Hot Springs	1921	9	22
California	Channel Islands	1980	390	1010
California	Death Valley	1994	5,219	13,518
California	Joshua Tree	1994	1,234	3,196
California	Kings Canyon	1940	722	1,869
California	Lassen Volcanic	1916	166	429
California	Redwood	1968	176	455
California	Sequoia	1890	631	1,635
California	Yosemite	1890	1,189	3,081
Colorado	Black Canyon of the Gunnison	1999	51	133
Colorado	Great Sand Dunes	2004	133	343
Colorado	Mesa Verde	1906	81	211
Colorado	Rocky Mountain	1915	415	1,078
Florida	Biscayne	1980	207	700
Florida	Dry Tortugas	1992	101	262
Florida	Everglades	1947	2,357	6,105
Hawaii	Haleakala	1916	46	118
Hawaii	Hawaii Volcanoes	1916	505	1,309
Idaho	Yellowstone	1872	3,470	8,980
Kentucky	Mammoth Cave	1941	83	214
Maine	Acadia	1919	47	123
Michigan	Isle Royale	1940	894	2,314
Minnesota	Voyageurs	1975	341	882
Montana	Glacier	1910	1,584	4,101
Montana	Yellowstone	1872	3,470	8,980
Nevada	Death Valley	1994	5,219	13,518
Nevada	Great Basin	1986	120	312
New Mexico	Carlsbad Caverns	1930	73.07	189
North Carolina	Great Smoky Mountains	1934	814	2,108
North Dakota	Theodore Roosevelt	1978	110	285
Ohio	Cuyahoga Valley	2000	51	134
Oregon	Crater Lake	1902	286	741
South Carolina	Congaree	2003	33	88
South Dakota	Badlands	1978	379	982
South Dakota	Wind Cave	1903	44	114
Tennessee	Great Smoky Mountains	1934	814	2,108
Texas	Big Bend	1944	1,252	3,242
Texas	Guadalupe Mountains	1966	135	350
U.S. Virgin Islands	Virgin Islands	1956	23	59
Utah	Arches	1971	119	309
Utah	Bryce Canyon	1928	56	145
Utah	Capitol Reef	1971	378	979
Utah	Canyonlands	1964	527	1,366
Utah	Zion	1919	229	593
Virginia	Shenandoah	1935	311	805
Washington	Mount Rainier	1899	368	954
Washington	North Cascades	1968	789	2045
Washington	Olympic	1938	1,442	3,734
Wyoming	Grand Teton	1929	484	1,255
Wyoming	Yellowstone	1872	3,470	8,980

PBS brings you a preview of the newest Ken Burns documentary series,
THE NATIONAL PARKS: AMERICAS BEST IDEA,.

The 12-hour, six-part documentary series, directed by Burns and co-produced with his longtime colleague, Dayton Duncan, who also wrote the script, is the story of an idea as uniquely American as the Declaration of Independence and just as radical: that the most special places in the nation should be preserved, not for royalty or the rich, but for everyone.

Only on PBS.