Strategic movements

Every activity in life, including economic activity, requires the cooperation of many members of society. Each participant in this market acts in his or her own interest, pursuing his or her own goal. For this reason, many economic situations that require the cooperation of two parties lead to conflicts of interest. This situation can be described as a game in which both parties to an economic conflict, seeking to maximise their utility, cause the end result to be economically inefficient. The solution usually achieved has the character of a stable equilibrium, but it is not efficient in the Pareto sense. In our paper we will present the theoretical foundations and applications of game theory to the negotiation process. We will do so on the basis of a two-sided monopoly model, in which there is a wholesaler-monopolist on one side and the only buyer of the good in the market on the other. In the first part of the paper we will describe one of the basic models of game theory . the prisoner’s dilemma. We will then consider why its solution is inefficient in the Pareto sense. We will show how the results change depending on the availability of the information set. We will then justify with the help of economic and psychological theories that in recursive games the results achieved can be better than those resulting from Nash equilibrium, and that under certain assumptions, the results of the game can be Pareto-efficient. In the next part of our paper, we will present situations in economics and economics in which the prisoner’s dilemma problem arises. In the last part of our work, we will confront the presented theory with the results of the conducted economic experiments. We will answer the question whether, in situations of conflict of interest that are described by the sequential prisoner’s dilemma, the only solution to the game is the outcome proposed by the theory, i.e. an inefficient solution [Axelrod, 1984].