Monday, October 15, 2012

Profit Margins

Things just don't work out right if work isn't linked with reward. 
Game theory is at the heart of this discussion. If you don't have the stomach or head for it, you're in good company right now. Say you have two partners in a given company. Now, the profit of the company is directly related to the input of the two individuals, their "synergy," and the cost of effort. In situations like these, one or both partners are often tempted to slack off, given that the other could, in theory, pick up the weight and still produce a solid profit. Without a partner, an individual wouldn't shirk their duties, in theory, as their profit is only dictated by themselves.
Don't understand? Good, neither do I.

I spent all weekend studying. Now, when I say that, you have to realize that my words are a bit slip. I spent all weekend in my dorm room, headphones on, my desk frescoed with notes, charts, printouts and homework. All for one goal: to face my Economic Strategy & Game Theory midterm head on, and to beat it at every turn.
I missed a beach party with a thousand other college students. I turned down an all-day boat party with some of the coolest guys and prettiest girls. I declined a birthday beach camp-out, complete with bonfires and late-night swimming. All to study. To go over these financial and economic mental exercises, so that I could change my wretched ways and be a good student for once. The input was there. There was no partner. My profit should have been based solely on my efforts.

My time is running out; it's almost the moment of truth. I'm still not comfortable. Best Response functions? Solving mixed-strategy Nash equilibria algebraically? It's beyond me. I'm strictly dominated by game theory. The conceptual, I grasp. The mathematical side, I don't. It just doesn't click. I haven't missed a single class. I pay attention. I even take notes. Do you know how rare that is for me, to take notes? You're more likely to see Bigfoot hijack a Ford Pinto and drive it into a Church's Chicken.

The midterm was a massacre. It was slaughter. Am I melodramatic? Of course. I've always had a penchant for theater. I was just sitting there, staring at these questions. I could answer them conceptually, but it was mostly just gut stuff. You value an item at $100 at an auction. If you win, you pay whatever the second-highest bid was. Do you pay $120? Mathematically, I have no idea. Conceptually, no way, Jose. Not worth it to you. Will that answer fly in a college class? I highly doubt it.

I'm not a mathematician. But after a weekend of studying, I was hoping the numbers would add up a bit more.

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