encourage other employees to work harder seeing as they now think they have a realistic chance of winning. This is actually done in the work place by Âfast trackÊ schemes. These allow the most able to compete among themselves, and the rest to do the same. Offering multiple prizes helps encourage participation. Finally, risk aversion 7 also plays an important role, as some would rather give in a higher bid than have a smaller chance of winning - even if their expected payoff is reduced slightly. The chances of this occurring would also influence othersÊ strategies slightly. Using equation (7) we can explore the affects of risk aversion. Once more using the idea of the ÂfakeÊ v, risk aversion would equate to having a more negatively skewed f(v) . Therefore F(v) would be slightly smaller, making the integral part of the equation smaller. Player iÊs optimum bid is therefore slightly larger in the case of others having risk aversion. The idea that ÂJob PromotionÊ is but one instance by which the same idea can be portrayed should be emerging by now. The most important message from this essay is that of a different method with which to approach many different areas. Moreover, new questions could also emerge, such as: how do you adjust your own strategic behaviour to consider the actions of others? Or even: why do humans not always follow optimal strategies? Auction theory allows the consideration of (Pareto) efficient allocations of resources and potential improvements: it has- been used to design large public auctions like the 3G 8 and 4G network sales, as well as many, many oil and commodity rights auctions. Hopefully it has become clear how this sort of thought allows for optimal decision making for such questions as the one originally posed. The discussions of alterations afterwards provide an ÂintuitiveÊ sense of the effects of certain new considerations that can be made. Games (and auctions) can be found in almost all aspects of life, understanding this disciplineÊs methodology will help one understand why people interact as they do. One thing is for sure: almost everyone could be better at playing lifeÊs games.
7 Camerer, Colin F. Behavioural Game Theory . Princeton UP, (2003). Print. 8 Börgers, Tilman, and Christian Dustmann. ÂRationalizing the UMTS Spectrum Bids: The Case of the UK AuctionÊ, (2002). Print.
74
Made with FlippingBook - Online Brochure Maker