Economics Made Economical

The Game Theory Grid

Example of Game Theory Grid

This is an example of the grid that economists use to determine Game Theory outcomes. The horizontal axis gives Corporation 1’s options, while the vertical gives Corporation 2’s. Pretend “Yes” means investment in a new technology and “No” means not investing. The numbers show each company’s profit gain in all four of the possible scenarios.

The upper left corner of each box is Corporation 1’s profit for the given action; the lower right is Corporation 2’s. If you were the CEO of Corporation 1 and you wanted to maximize the possible benefit to yourself while limiting benefit received by your competition, which option would you choose? Is there a Nash Equilibrium?


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