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Utilizing Nash Equilibrium in Your Relationship Life

Finances are the biggest subject of romance fights amongst couples. Regardless of your income status, every couple fights over what to buy. With a combined income, there exists tradeoffs and sacrifices for every purchase. Rather than getting families and friends to mediate every argument, many people don’t realize there is a more scientific and objective solution to solve this dilemma in deciding which item to buy. This is where the theory of Nash Equilibrium come in handy.

The famed mathematician John Nash proposed an elegant solution to any arguments over money. He offered a basic equation for two people to divide anything quantifiable to maximize join benefit. Similar to calculating the Nash Equilibrium, this method calls for each individual to rate how happy they would be if they got all of it, on a scale of 1 to 10, as well as how happy they would be if they can’t reach an agreement and have to give up without either person getting anything. In simpler terms, couples would give one score in response to each of the two questions “how happy you would be if you got all the money for your desired purpose” and “If you can’t agree and no one gets anything, how happy would you be with no deal?” Their happiness score serves as the calculated payoff for either getting(win payoff) or not getting (lose payoff) his/her desired item. This calculation helps in determining the ideal split that would produce the highest value for the product.

However, as practical as this calculation sounds, this mechanism does not solve every possible scenario between the lover’s quarrel. If two people both really want something, but would still be fairly happy if they got nothing, then there is no solution that produces a net gain in happiness for both parties. This situation is common in real life in which both parties are so invested in the negotiation that they’d rather make no deal than to get an unfair portion. After all, the selfishness kicks in and you both concede that no arrangement will satisfy either of you so you simply give up the topic. More often than not, most people would probably not be happy with a failed compromise, therefore making the formula more likely to produce a valid deal and resolve the situation.

This is an interesting way of utilizing the bargaining power theorems and Nash Equilibrium calculations within our daily lives. Next time if you argue with your significant other on what to spend money on, take out your notebook and start the calculation while he/she goes on a ramp. Find the solution so you can both be happy.

Source: http://time.com/4867730/relationships-money-tool/

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