Game Theory – The Nash Equilibrium

Game theory is “the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.” Game theory is mainly used in economics, political science, psychology, computer science as well as logic.

The Nash Equilibrium was theorised by Professor John Nash, as portrayed in one of my favourite films A Beautiful Mind. Which amongst other works, won John Nash a Nobel Prize for economics.

The Nash Equilibrium differs from normal game theory, as it looks at ‘win/win’ scenarios. Specifically, a Nash Equilibrium is a rule or law that no one would want to brake, even in the absence of effective enforcement.

We have ‘gamed out’ many different S-World scenarios and looked to find Nash Equilibriums. For instance, the contribution to S-World and the GGW-String.

At 25% of gross profit (even thought this is only an equivalent of a 4.5% franchisee fee) it’s not something one would pay if one did not have to. So, we brake it in half, making 2 sets of 12.5%.

Set one is for mandate costs, making new websites for each villa mandated by each company and marketing them. If one likes the mandate plan (which is a fundamental part of the Villa Secrets plan), this is a cost that would need to be paid regardless . However, by keeping things in house and using our technology, one effectively gets twice the return one would have received from a profit based marketing and web development company. If one is excited by our mandate plan, this expense is essential to it, and so would be paid regardless of enforcement or contract.

The second 12.5% becomes the cost of S-Web framework and software development, in the form of the TFBMS AI. We would say that our plans are well tested, well presented, and well-reasoned. When we look at the various scenarios we have created, we see that in 2019 a good TFBMS AI more than doubles profit. In addition is the general idea that 12.5% is a fair price to pay to keep up with competitors in the vacation rentals industry that greatly relies on technology and the web in general. Thus, if the TFBMS was created per agreement and was as effective as predicted, this 12.5% would be a price most would choose to pay regardless of enforcement or contract.

Once the network is massive and is contributed to by many, costs will lower. But as our technology will improve, we could deliver the same or better service at a lower price, and at this later stage, we may allocate surplus revenue to different S-World special projects.