Game Theory in Purchasing a Car
Cars. They are easily one of the best modes of transportation. As of 2010 there are 210 million people in the United States licensed to drive a car. Cars are fast, convenient, and for the most part pretty efficient. However, these vehicles can be quite expensive. USAtoday estimated the average prices of cars and trucks this past April to be over $33,000 per vehicle. This explains why people shop around to get the best bang for their buck. Once they do find the car of their choice most people generally want to get the best deal possible. This is where game theory comes into play.
Recently in class we’ve talked about game theory and decision making. In this article professor Bruce Bueno de Mequita explains how to buy a car through simple game theory and logic. Basically he explains to call a dealership before going. He then says to tell the dealership that you are buying a car and you want it for a certain price and if not you are taking your business elsewhere. If the dealer is threatened they will give the person either the best price possible or assume they are bluffing and hang up. However, dealers do not want to risk losing customers to their competition.
This article is interesting because it uses a complex economic concept to explain a fairly simple task. It shows how game theory can be used in everyday life in real world applications. It’s also interesting to see that car dealers have to put in real thought in what they say to people or else they won’t get any business. If you want a better deal use game theory in your next big purchase.
http://bigthink.com/think-tank/how-to-buy-a-car-using-game-theory