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    Game Theory Tipping Strategy

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    Using Game Theory to explain, would you be likely to tip differently at the café next to your office than you do at the one at which you stop on your summer vacation to Yellowstone?

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    Solution Preview

    Hello Student,

    Before you answer this question, the first thing you may want to do is understand the definition of "game theory." Game Theory has a series of definitions depending on the field in question, which may either be psychology, mathematics, economics or otherwise. For the purposes of this discussion however, we are concerned with the economic definition. Note the following:

    "Game Theory is a set of concepts aimed at decision making in situations of competition and conflict (as well as of cooperation and interdependence) under specified rules. Game theory employs games of strategy (such as chess) but not of chance (such as rolling a dice). A strategic game represents a situation where two or more participants are faced with choices of action, by which each may gain or lose, depending on what others choose to do or not to do. The final outcome of a game, therefore, is determined jointly by the strategies chosen by all participants. These are also situations of uncertainty because no participant knows for sure what the other participants are going to decide." (Source: ...

    Solution Summary

    This solution first provides you with an economic definition of Game Theory. It then tells some economic scenarios which Game Theory considers before looking at whether it is likely for one to tip differently at the cafe next to your office than you do at the one at which you stop on your summer vacation to Yellowstone (in light of Game Theory). Solution is adequately referenced.