Game Theory - and the sharemarket
'Prisoner's dilemma' - a game where 2 crooks are arrested and interrogated separately - the police offer concessions to each if they'll dob in the other - if both hold strong all good for the crims - if one dobs and the other doesn't then woe-betide the one that stayed true - if both dob each other then bad but not as bad as previous
'Chicken' - 2 cars speed towards each other on a single track - if both swerve then all good - if one swerves but the other stays on the track then the swerver loses face - if neither swerves its disaster
Making decisions on stocks is a bit similar
- do I hold hoping others will hold?
- do I sell hoping to nudge others to sell (and buy back later/cheaper)?
- do I buy hoping to nudge others to buy (and then sell)?
- do I wait to what others are doing?
- do I get in early before others (and get out when they arrive)?
- etc etc
BUD Chart, page-1729
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