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Invisible Hand Game
An 'invisible hand game' is a strategic interaction that has a single Nash equilibrium which is also Pareto efficient. This type of game is named after Adam Smith's concept, as it demonstrates how individuals pursuing their own self-interest can be guided by implicit, non-explicit forces to an outcome that is mutually beneficial for all players.
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Social Science
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Economy
Economics
CORE Econ
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
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Friedrich Hayek's Explanation of Adam Smith's Invisible Hand
The Invisible Hand in Markets
Invisible Hand Game
Adam Smith on Sympathy in 'The Theory of Moral Sentiments'
The Paradox of the Invisible Hand
An influential 18th-century economic theory introduced the idea of an 'invisible hand.' Which statement best analyzes how this mechanism is said to function within the broader context of its author's philosophy?
Applying the 'Invisible Hand' Concept
The economic theory of the 'invisible hand' posits that the mechanism functions effectively because human beings are motivated exclusively by self-interest, with no inherent regard for the well-being of others.
The Mechanism of the Invisible Hand
The Paradox of the Invisible Hand
An influential 18th-century economist presented a complex view of human motivation and its economic consequences. Match each component of this economic philosophy with its correct description.
Arrange the following statements to illustrate the logical sequence of how the 'invisible hand' mechanism is described to function in an economy.
A technology firm develops a groundbreaking water purification device. To maximize shareholder returns, the company prices the device at a level that makes it inaccessible to the impoverished, drought-stricken communities that need it most. Based on the economic principle of the 'invisible hand,' which statement provides the most accurate evaluation of this scenario?
An influential 18th-century economic text argues: 'It is not from the __________ of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.' Fill in the blank with the single word that represents the motivation the author is contrasting with self-interest.
Evaluating the Limits of the Invisible Hand
The Invisible Hand as the Foundation for Perfectly Competitive Market Models
Learn After
The Anil and Bala Game as an Invisible Hand Game
Contrast to Invisible Hand Games
Rice-Cassava Game as a Dominant Strategy Equilibrium
Two competing software companies, Innovate Inc. and Tech Solutions, must independently decide whether to develop their next product on a new, open-source platform ('New Platform') or stick with the current proprietary platform ('Old Platform'). The 'New Platform' allows for greater compatibility and network effects, so both companies achieve the highest profit if they both adopt it. The payoff matrix below represents the profits for each company based on their choices, with Innovate Inc.'s profit listed first.
- If both use 'Old Platform', profits are (3, 3).
- If Innovate uses 'Old Platform' and Tech Solutions uses 'New Platform', profits are (1, 5).
- If Innovate uses 'New Platform' and Tech Solutions uses 'Old Platform', profits are (5, 1).
- If both use 'New Platform', profits are (6, 6).
Based on an analysis of the strategic incentives, which statement best describes the situation?
Public Park Maintenance Scenario
The Logic of Uncoordinated Success
In a strategic scenario where independent, self-interested choices unexpectedly lead to an outcome that is best for the entire group, different elements work together. Match each conceptual element of this scenario with its correct description.
True or False: In any strategic interaction where each participant independently chooses the action that maximizes their own personal payoff, the resulting combination of choices is guaranteed to be an outcome where it is impossible to make someone better off without making someone else worse off.
Evaluating Strategic Outcomes
Consider four different strategic situations. In which one do the actions of self-interested individuals, acting without explicit coordination, result in a single, stable outcome that is also the most beneficial for the group as a whole?
Water Conservation Dilemma
Coffee Shop Competition
Fishery Management Dilemma