Page 11 - Azerbaijan State University of Economics

Salah Salimian, Mahdi Movahedi Beknazar, Kiumars Shahbazi, Zahra Khalilzadeh Silabi: The Role
of Investment in the Equilibrium of International Political Economy (Game Theory Approach)

METHODOLOGY
The research methodology will be presented here in three subsections:

Game theory
The modeling of game theory in international economy, work economy, major
economy and general tax becomes general and is now moving towards development
economy and economic history. Many of those who make models utilize game theory
as it allows them to think as an economist when the pricing theory is not sufficient
and responding (Gibbons, 1997). The present study has used game theory to achieve
the research objectives.

Game theory tries to model the situations where individuals' interests are in conflict. The
main aim of game theory is to present an attitude and approach based on which the players
can wisely behave and before taking any action, think deeply about it and select the action
which is to their benefit. Game theory is especially useful when the number of competing
players (agents) is limited since in this case; any player significantly influences the
earnings of other players (Abduli, 2012; Mas-Colell et al. 1995).

Games have various dimensions; therefore, various classifications could be presented.
The main classification is to classify games into cooperative and non-cooperative
games. The game theorists differentiate the non-cooperative games into static and
dynamic non-cooperative games. Static and dynamic games are classified into games
of complete and incomplete information. Therefore; the non-cooperative games can
be divided into four groups of dynamic games of complete information, static games
of incomplete information, dynamic games of incomplete information and
equilibrium concept (Shy, 2014; Mas-Colell et al. 1995).

Equilibrium concept
Although the games might have many consequences, it is almost impossible to
estimate the final result of a game. In order to forecast the result of a game, it is
necessary to expand the methods and algorithms that confine the set of all
consequences to a smaller set, called equilibrium consequences. Moreover, some
features should be specified that are beneficial in emergence of equilibrium. Assume

2
1

that = ( , , … , , … , ) is a list of behaviors that N players take (play). Now,
consider certain players represented by i (i could be any player from 1 to N), subtract
the behavior of i player from a consequence. Now the list showing the behavior
−
adopted by all players except player i is shown as by . In other words, − =

1
( , … , −1 , +1 , … , ).

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