Nash Equilibrium and Opportunity Cost
Zhanwen Ding · Journal of Jiangsu University of Science and Technology · 2001
It is pointed out that if there are more than one or there is no Nash equilibrium of pure strategy,the players will pay the opportunity cost in some sense when they make their strategy decisions. A method, offered to analyze the problem of opportunity cost the players face in a game,is put forward to analyse the opportunity cost before the game begins and to analyze the players' risk tendency toward this opportunity cost. The results show that Nash equilibrium of pure strategy will not be changed by the players' any opportunity tendency, and in the case of mixed strategy profile, even with the opportunity tendency the players would not deviate from the Nash equilibrium under the risk-neutral assumption but would do so under the non-risk-neutral assumption.Finally,an example is given in which the above-mentioned method is properly applied in non-risk-neutral assumption.