Game theory -Cutting a Cake at


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Game theory -Cutting a Cake at

  1. 1. Game Theory – Cutting a Cake at<br /><br />
  2. 2. Game Theory is a set of strategic models where hypothetical situations are simulated. <br />The people who are part of the game will have to act in these situations and arrive at situations by making choices. <br />Game Theory<br /><br />
  3. 3. The choice that one of the players makes is dependant on the choice the other players make. <br />This makes Game Theory interesting and easily arrive at solutions in given conditions and situations.<br />Game Theory<br /><br />
  4. 4. Game Theory was developed in the 40s in connection with war strategies. <br />Now it is being used by managers to arrive at an optimal price and output for products. <br />As Managers today deal with a higher number of ever changing scenarios, they need to plan ahead for unexpected situations.<br />Application of Game Theory<br /><br />
  5. 5. It is one the techniques that managers of firms under imperfect markets like duopoly, oligopoly, monopolistic competition, etc use to arrive at the optimum price of a product along with the supply and demand interactions.<br />Application of Game Theory<br /><br />
  6. 6. There are a number of games in Game Theory. Some of the most popular are Prisoner's Dilemma. <br />We shall discuss about game called Cutting a Cake.<br />Cutting A Cake<br /><br />
  7. 7. In this game, two persons A and B are given a cake and they will have to share the cake and they shall receive a fair share in the cake.<br />Here the problem is that if A is asked to cut the cake, there is a chance that he reserves the bigger piece for himself and give B the smaller piece.<br />Cutting A Cake<br /><br />
  8. 8. Same is the case with B. If B is asked to cut the cake, he will do exactly as A. <br />So, the best solution to this problem is given as the person who is not cutting the cake will reserve the right to choose first.<br />Cutting A Cake<br /><br />
  9. 9. Here, the person will choose the bigger piece available and leave the smaller piece to the one who had cut the cake.<br />So, the person cutting the cake will cut the cake in such a way that either of them will get the maximum possible portion of the cake.<br />Cutting A Cake<br /><br />
  10. 10. For more details on Economics you can visit our website at and<br /><br /><br />