Supplementary Reading: Game Theory

What It Is:

Game theory is a tool used to analyze strategic behavior by taking into account how participants expect others to behave. Game theory is used to find the optimal outcome from a set of choices by analyzing the costs and benefits to each independent party as they compete with each other.

How It Works/Example:

Game theory explores the possible outcomes of a situation in which two or more competing parties look for the course of action that best benefits them. No variables are left to chance, so each possible outcome is derived from the combinations of simultaneous actions by each party.
Game theory is best exemplified by a classic hypothetical situation called the Prisoners' Dilemma. In this scenario, two people are arrested for stealing a car. They will each serve 2 years in prison for their crime.
The case is air-tight, but the police have reason to suspect that the two prisoners are also responsible for a recent string of high-profile bank robberies. Each prisoner is placed in a separate cell. Each is told he is suspected of being a bank robber and questioned separately regarding the robberies. The prisoners cannot communicate with each other.
The prisoners are told that a) if they both confess to the robberies, they'll each serve 3 years for the robberies and the car theft, and b) if only one confesses to the robbery and the other does not, the one who confesses will be rewarded with a 1 year sentence while the other will be punished with a 10 year sentence.

In the game, the prisoners have only two possible actions: confess to the bank robbery, or deny having participated in the bank robbery.
Since there are two players, each with two different strategies, there are four outcomes that are possible (follow the reference, study the scheme)

The best option for both prisoners is to deny committing the robberies and face 2 years in prison for the car theft. But because neither can be guaranteed that the other won't confess, the most likely outcome is that both prisoners will hedge their bets and confess to the robberies -- effectively taking the 10 year sentence off the table and replacing it with the 3 year sentence.

Why It Matters:

Economists use game theory to understand the behavior of firms in an oligopoly (think OPECand other cartels) -- specifically in regards to price fixing, price wars, collusion, etc. Game theory gives economists a way to predict outcomes when firms engage in these kinds of behavior

Vocabulary Notes

1. optimal outcome –наилучший результат

2. the costs and benefits –издержки и экономический эффект

3. competing parties –конкурирующие стороны

4. high-profile bank –солидный, крупный банк

5. to deny committing the robberies –отрицать совершение грабежей

6. to hedge one’s bets –подстраховать себя

Text Assignments

1. Read and translate the passage of the text, printed in italics.

2. Divide the text into the parts according to the ideas given in it.

3. Choose the suitable headline for each part.

4. Write out key words and word combinations and give their Russian equivalents.

5. Render the text in Russian / English using the following expressions:

1) The text is headlined … - текст озаглавлен …

2) The aim of the text is to give the readers some information on …- целью текста является информировать читателей о …

3) The text describes … - в тексте описывается…

4) The author points out/ stresses… - тор подчеркивает, акцентирует…

5) The author comes to the conclusion that … - автор приходит к выводу…

Unit 4. Talking about Careers in Economics

Before You Read

Answer the questions:

1. Where would you like to work after graduating from the University?

2. What career are you planning to make in future?

3. Below there is a list of some of the terms and terminological expressions you will come across in the following text. See if you understand them. Consult a dictionary: http//www.multitran.ru to help you, check with the key.

Key Vocabulary

1. to monitor trends	11. to distribute resources
2. to develop forecasts	12. to conduct research
3.to obtain data	13. to collect data
4. to present concepts	14. to perform economic analysis
5. to specialize in a particular area	15. to examine the market
6. to handle the competition	16. to investigate the area
7. to forecast trends	17. to apply techniques
8. to explain reasons	18. to formulate models
9. to assess conditions	19. to provide the risk assessment
10. to administer surveys	20. to work under pressure of deadlines

Read the text, remember the bolded expressions, answer the questions:

1. What do economists study?

2. What are the main responsibilities of economists?

3. What do monetary economists deal with?

4. What are international economists involved in?

5. What are demographic economists concerned with?

6. What do Econometricians investigate?

7. Whom do Government economists consult?

8. Is it easy to work as an economist?

Economist: Career Overview

Economists study how society distributes resources, such as land, labor, raw materials, and machinery, to produce goods and services. They conduct research, collect and analyze data, monitor economic trends, and develop forecasts on a wide variety of issues, including energy costs, inflation, interest rates, exchange rates, business cycles, taxes, and employment levels, among others.

Economists develop methods for obtaining the data they need. For example, sampling techniques may be used to conduct a survey, and various mathematical modeling techniques may be used to develop forecasts. Preparing reports, including tables and charts, on research results also is an important part of an economist's job, as is presenting economic and statistical concepts in a clear and meaningful way for those who do not have a background in economics. Some economists also perform economic analysisfor the media.

Many economists specialize in a particular areaof economics, although general knowledge of basic economic principles is essential. Microeconomistsstudy the supply and demand decisions of individuals and firms, such as how profits can be maximized and the quantity of a good or service that consumers will demand at a certain price. Industrial economists and organizational economists study the market structure of particular industries in terms of the number of competitors within those industries and examine the market decisions of competitive firms and monopolies. These economists also may be concerned with antitrust policy and its impact on market structure. Macroeconomists study historical trends in the whole economy and forecast future trends in areas such as unemployment, inflation, economic growth, productivity, and investment. Monetary economists and financial economistsdo work that is similar to that done by macroeconomists. These workers study the money and banking system and the effects of changing interest rates. International economistsstudy global financial markets, currencies and exchange rates, and the effects of various trade policies such as tariffs. Labor economistsand demographic economists study the supply and demand for labor and the determination of wages. These economists also try to explain the reasons for unemployment and the effects of changing demographic trends, such as an aging population and increasing immigration, on labor markets. Public finance economistsare involved primarily in studying the role of the government in the economy and the effects of tax cuts, budget deficits, and welfare policies. Econometricians investigate all areas of economics and apply mathematical techniques such as calculus, game theory, and regression analysis to their research. With these techniques, they formulate economic models that help explain economic relationships that can be used to develop forecasts about business cycles, the effects of a specific rate of inflation on the economy, the effects of tax legislation on unemployment levels, and other economic phenomena.

Many economists apply these areas of economics to health, education, agriculture, urban and regional economics, law, history, energy, the environment, and other issues. Economists working for corporations are involved primarily in microeconomic issues, such as forecasting consumer demand and sales of the firm's products. Some analyze their competitors' market share and advise their company on how to handle the competition. Others monitor legislation passed by Congress, such as environmental and worker safety regulations, and assess how new laws will affect the corporation. Corporations with many international branches or subsidiaries might employ economists to monitor the economic situations in countries where they do business or to provide a risk assessment of a country into which the company is considering expanding.

Economists working in economic consulting or research firms sometimes perform the same tasks as economists working for corporations. However, economists in consulting firms also perform much of the macroeconomic analysis and forecastingconducted in the United States. Their analyses and forecasts are frequently published in newspapers and journal articles.

Another large employer of economists is government. Economists in the Federal Government administermost of the surveys and collect the majority of the economic data about the United States. For example, economists in the U.S. Department of Commerce collect and analyze data on the production, distribution, and consumption of commodities produced in the United States, and economists employed by the U.S. Department of Labor collect and analyze data on the domestic economy, including data on prices, wages, employment, productivity, and safety and health.

Economists who work for government agencies also assess economic conditions in the United States and abroad to estimate the effects of specific changes in legislation and public policy. Government economists advise policy makers in areas such as the deregulation of industries, the effects of changes to Social Security, the effects of tax cuts on the budget deficit, and the effectiveness of imposing tariffs on imported goods. An economist working in State or local government might analyze data on the growth of school-age or prison populations and on employment and unemployment rates to project future spending needs.

Work environment. Economists have structured work schedules. They often work alone, writing reports, preparing statistical charts, and using computers, but they also may be an integral part of a research team. Many work under pressure of deadlinesand tight schedules, which may require overtime. Their routine may be interrupted by special requests for data and by the need to attend meetings or conferences. Some travel may be necessary.

Text Assignments

1. Divide the text into the parts according to the ideas given in it.

2. Choose the suitable headline for each part.

3. Write out key words and word combinations and give their Russian equivalents.

4. Render the text in Russian/ English

Vocabulary Expansion

1. Match these words to make word partnerships from the article

1. to monitor	a. meetings
2. to develop	b. reasons
3. to present	c. forecasts
4. to perform	d. concepts
5. to explain	e. trends
6. to administer	f. economic condition
7. to assess	g. economic analysis
8. to attend	h. surveys

2. Use an appropriate preposition to make a collocation according to the text. Translate the expressions from English into Russian

1. to develop a forecast … a variety of issues

2. to develop methods … obtaining data

3. to present a statistical concept …a clear way

4. a background … economics

5. to apply mathematical techniques … the research

6. the effect of tax legislation … unemployment levels

7. to impose tariffs … imported goods

8. legislation passed … congress

3. Match the following words in column A with their synonyms in column B

A	B
1. to assess	a. to look into
2. to examine	b. to estimate
3. to forecast	c. to interpret
4. to analyze	d. to foresee
5. to study	e.to manage
6. to administer	f. to research
7. to advise	g.to participate
8. to attend	h. to consult

4. Complete the chart

Verb	Adjective	Noun 1	Noun 2
produce	productive	producer	productivity
organize
analyze
invest
perform
determine
investigate
advise

Over to You

1. Do some research concerning your career opportunities in the field of Economics, think about your future place of work, collect useful data. http://www.aeaweb.org/students/Careers.php

http://www.searchbydegree.com/economist-career.html

2. Share the results of the survey with your group-mates, expand the list of your future career opportunities

3. Study the following career profile and answer the questions:

1. Why did Sarah Voon decide to major in Economics?

2. Why did she choose to take further studies?

3. What courses did Sarah particularly enjoy?

4. Where did she use to work after graduating from the University?

5. Where does she work now?

6. What job-related skills has she developed working in different spheres of Economics?

7. What did she appreciate while studying at the University?

8. What did she take advantage of at the University?

9. What experience was invaluable for Sarah?