The game of scale: decision making with economies of scale

While diffusion of innovation topics in economics and majority games in game theory have been widely studied, the impact of economy-of-scale effects in aggregated decision making has received little attention. In this paper, we present a basic model, the Game of Scale, to study the effects of economy-of-scale in decision making among a large pool of self-interested agents. We solve the model's static equilibria and present two dynamic decision models, one myopic and one trend-following. Most of the parameter space converges quickly; however, the behaviors exhibited near critical input values show drastic changes. We demonstrate how trend-following can improve global outcomes over myopic decision making. Finally, we describe how the game can be externally controlled. Categories and Subject Descriptors J.4 [Computer Applications]: Social and Behavioral Science-Economics; K.4.4 [Computing Milieux]: Computers and Society--Electronic Commerce General Terms economics, theory Keywords e...

• Type: Conference
• Year: 2007
• Where: ACMICEC
• Authors: Christopher J. Hazard, Peter R. Wurman
• Keywords: ACMICEC 2007, Decision Making, Decision Model, ECommerce, Game Theory