Behavioral economics & game theory in managerial microeconomics Research Paper

behavioural economicals & racy theory in managerial microeconomics - Research Paper ExampleConsequently, rules are set in a complex manner to ensure a win-win situation for all. This creates difficulties and necessitates systematic analysis prior to the actual position of the situation. In some cases, challenges might arise when a situation is in progress, creating much complexity take to multiple systems being set up to counter the challenge. In managerial microeconomics, managers face similar situations specially in marketing of products and services. Competitors may keep changing their tactics, in order to keep up with the changing trends in the market. Competitors actions as well as micro and macroeconomic factors beyond the control of firms such as government policies on taxation, social corporate welfare, interest rates, and currency deflation or inflation creates complexity in the note world. In addressing the above challenges among others, managers must thus adopt a ga me like approach. Representing and puzzle out Games by Managers in the Business World Assume the fol abjecting payoff scenario Comp any(prenominal) as actions High damage Low price Company Bs action High price 200A 200B 200A -40B Low price -40A -120B 100A 50B Solution If company B has set a high price wherefore A chooses low price, the B high/Ahigh approach can be ignored. If B sets a low price, then A chooses a low price, the Blow/ Ahigh branch will be impractical. Consequently, B is coerce to choose between high price (-40) and a low price (50). In these two scenarios, A must follow B price strategy beca use they are the dominant strategies. The above scenario illustrates a procedure of key ideas for managers. In decision making, a set of strategies such that each is best for each player, disposed that the others are playing their own equilibrium is the...This research paper analyzes the place of game theory and behavioral theory in managerial economics in isolation, then i ntegrates them together, in applying their arguments in addressing real business situationsGame theory is complex and involves a lot of difficulties in reasoning A game is any circumstance comprising interdependence amongst players. There are different types of games. This study focuses on co-operative versus non-co-operative games because they involve competition among economic entities, challenging leaders and their management skills. They are characterized by aggressive competition in the business world.Behavioral economics assimilates psychology and economics by recognizing systematic inconsistencies in decision making. These are now recognise to be an essential basis of error in business decisions, they deliver the underpinning for both marketing and finance. At the principal of behavioral economics is the principle that increasing practicality of the psychological underpinnings of economic exploration will mend economics on its own terms, creating theoretical insights, makin g better predictions of field phenomena.Managerial economics encompasses use of economic approaches of thought to scrutinize business condition. It is the incorporation of economic theory with business practice for the scatter of aiding decision making and accelerative forecasting.In attempts to making optimal decisions, managers should be open minded and super flexible, as there is no individual with optimal knowledge.