Game Theory the Scenario That Term Paper

Excerpt from Term Paper :

They also will exacerbate the deficit and could compromise the economy. There is disagreement over which policy prescription is going to be more likely to damage the economy. The health of the U.S. economy, however, is subject to a lot of variables, and one's own economic situation is only somewhat affected by the state of the U.S. economy. Still, the voter wants to vote in a way that increases the odds of a positive financial outcome.

There are a number of tools that can help to visualize the choice, but decision trees are not easy to draw in Word. Excel can be used to perform the same function. The voter can calculate that if the President spends too much money it will cost $40,000 in future tax increases and decreased job prospects.

Candidate a

Certainty

Value

Outcome

Certainty

Value

Total Odds

Total Value

Net

Tuition Cut

50%

$10,000

None

80%

$0

40.0%

$10,000

$4,000.0

Bad Economy

20%

-$40,000

10.0%

-$30,000

-$3,000.0

No Tuition Cut

50%

$0

None

90%

0

45.0%

$0

$0.0

Bad Economy

10%

-$40,000

5.00%

-$40,000

-$2,000.0

-$1,000.0

Candidate B

Tax Cut

80%

$500

None

50%

0

40.0%

$500

$200.0

Bad Economy

50%

-$40,000

40.00%

-$39,500

-$15,800.0

No Tax Cut

20%

$0

None

90%

0

18.0%

$0

$0.0

Bad Economy

10%

-$40,000

2.00%

-$40,000

-$800.0

-$16,400.0

The wild card is that the bad economy might happen no matter what the policies on taxes and tuition are, because there are other policies and other global factors that affect the economy. These other factors clearly affect the outcome, because if the economy is bad, neither candidate is going to have a positive outcome. Governmental giveaways will not help the voter if the economy is in the tank and earning power decreases. Candidate B's tax cut is especially useless. While the voter might be tempted to discount the bad economy from the decision, because it is not related to the decision, the odds of a bad economy do change with the decision and this is important. Tuition increases are less likely to affect American competitiveness because they are a small part of the budget; tax cuts are a much larger part of the budget and therefore if they are not matched by spending cuts are highly likely to have an impact on future American competitiveness. For those already in a good position, tax cuts look pretty good. For a student who is going to exit university with student loans and needs to be able to increase earning power rapidly, tax cuts are less important that economic competitiveness.

Thus, we can see how voting is a game. The voter first must make a decision about how important each factor is. The voter might decide that a non-financial factor is more important than money, and vote that way. But using monetary terms, the voter is asked to choose between a variety of financial policies. The outcomes of these policies are uncertain, so the voter must decide based on odds of the outcomes, and the size of the money at stake in the outcomes. A voter who is not a student and has no children who will go to college in the future would find Candidate B's tax cuts a better option. A voter who is a student or has children who will go to college would likely find Candidate a's policies more appealing, unless the size of the tax cut is much larger (so wealthy people might prefer B, while middle class and poor people would prefer a).

Voting is even more complex in the real world, because of the variety of potential outcomes. These exist on a continuum, especially where outcomes like future income are concerned. The voter must find a way to process this information in a rational manner in order to make the best decisions. Politics is also about more than economics, which complicates things. This is where the idea of utility comes into play. A clean environment has value, but that value is difficult to quantify. Social policies are also difficult to quantify sometimes. The voter must, for example, decide if things like gay marriage or legalizing marijuana are important enough to overrule the financial aspects of this decision. This is why the non-financial issues are tricky for voters, because emotion can distort the true value of those policies such that something…

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