Ever wondered, as small a thing as “POKER” can teach you as vast a subject like “Economics”. Muddled?
Let me elucidate.
Starting with the game of poker, you have cards , you bet on your cards without knowing other’s cards . If you feel your cards are not good enough, you can quit and if all persons quit , the last person wins without showing his / her cards. Just as simple as that. But stop , its perhaps not that direct . Do you know , the person having worst of cards has a fairly good probability of winning . Confused… It goes like , if you have the best of cards , yor are pretty sure of winning and thus you bet to any extent . But , if you have worst of cards , you automatically know that these cards wouldn’t win you the game . So , you have 2 options . Withdraw and let the money you betted till then go away or bet so confidently that other players interpret that you have best of cards and let them withdraw . So , in the end you are the winner .
Its all about confidence and attitude .
By this example I just wanted to say you that the most important part in todays economy is extracting the hidden information . In poker ,the other player’s information about cards is hidden from you and your victory or failure depends on your interpretation of that hidden information .
If you are a businessman , you buy products from someone and sell to other . While purchasing , if you interpret the hidden information from the retailer that how much the product is worthy to him , you can have great profits .
That is the basic principle of economics : ” Extract hidden information ” and victory is your’s.
Let’s talk about another example of an auction of “cars” . There are 2 types of cars in the auction : “winners ” & “losers” , winners , the good working cars could be purchased till price $5,000 and on the other hand , “losers” cars don’t function properly and could be purchased till $2,000 . Now , I go to that auction , but lets consider a twist . Suppose that I don’t know which car I am buying . I am paying $3,000 and there is a 50-50 chance that I may get a “winner” car or a “loser” car . I would be pretty happy if I get “winner ” car at this price ($3,000) but a bit sad if I get “loser” car . But the seller would be in deep loss if I took a “winner” car from him at $3,000 . So , deliberately , he will keep all “losers” type of cars in the auction and it would be pretty sure that I buy only “losers” cars in $3,000 . This way he has hidden the information from me that all the cars are “losers” type and I still in hope of getting a “winner” at $3,000 goes to that auction . So , I will doubt going in that auction and ultimately that business would come to a halt .
This is the basic principle of information hiding . Let’s understand this with one more situation :
We all have heard about insurance companies . Let’s say ‘xyz’ is a company that provides health insurance . I go to that company to get my insurance done . Suppose , I am seriously ill but I hide that information from the company. Company would not like to provide me insurance until they extract all hidden information from me . Otherwise , they will not provide insurance to me . So information hiding is catastrophic for business .
No one would like to do business with us if we are hiding some information crutial for that particular business . If a person is able to extract hidden information of a business , he will surely succeed . No-one likes to be fooled .
That’s the reason , fair and transparent trade is required . Government rules and regulations are striving hard for the same (to bring fairness in the trade ) .
So , I kindly request my readers to apply basic principles of economics in their day-to-day life and observe the change.
REMEMBER :
” The purpose of studying economics is not to acquire a set of ready-made answers to economic questions but to explore your own . “