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What Is a Game Theory Model? Give Two Examples of Decisions

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Essay

What is a game theory model? Give two examples of decisions by households or businesses that you think might be appropriately analyzed using game theory models. Give two examples of decisions by households or businesses for which the use of a game theory model might not be necessary. What is the harm of using a game theory model where it is not necessary?


Definitions:

Prime Costs

The combined costs of direct labor and direct materials involved in the production of goods.

Factory Overhead

includes all the indirect costs associated with manufacturing, such as utilities, maintenance, and salaries of indirect labor.

Direct Labor

The labor costs directly associated with the manufacturing of a product, including wages of workers physically involved in production.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

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