Applied Mathematics
Volume 4, Issue 12 (December 2013)
ISSN Print: 2152-7385 ISSN Online: 2152-7393
Google-based Impact Factor: 0.58 Citations
A Forward-Looking Nash Game and Its Application to Achieving Pareto-Efficient Optimization ()
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ABSTRACT
Recognizing the fact that a player’s cognition plays a defining role in the resulting equilibrium of a game of competition, this paper provides the foundation for a Nash game with forward-looking players by presenting a formal definition of the Nash game with consideration of the players’ belief. We use a simple two-firm model to demonstrate its fundamental difference from the standard Nash and Stackelberg games. Then we show that the players’ belief functions can be regarded as the optimization parameters for directing the game towards a much more desirable equilibrium.
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