Game Theory: Was the downfall and bailout of Northern Rock inevitable?

Mark: 2:1

For the strategic thinking module I took on uncharted territory on using game theory on a very modern economic scenario. The events on Northern Rock signalled the start of the credit crunch here in the UK. I set out to find whether according to game theory were the events that unfolded inevitable or irrational. In this assignment I used various games such as the stag-hunt game, prisoners dilemma game as well as extended examples and nash equlibria. While hindsight is a great benefit, I argue that the government failed to ensure confidence in the failing bank and that more than “cheap talk” was needed to ensure survivability.

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