Neglected Theories of Business Cycle—Alternative Ways of Explaining Economic Fluctuations

Abstract

The business cycle is a frequent topic in economic research; however, the approach based on individual strategies often remains neglected. The aspiration of this study is to prove that the behavior of individuals can originate and fuel an economic cycle. For this purpose, we are using an algorithm based on a repeated dove–hawk game. The results reveal that the sum of output in a society is affected by the ratio of individual strategies. Cyclical changes in this ratio will be translated into fluctuations of the total product of society. We present game theory modelling of a strategic behavioral approach as a valid theoretical foundation for explaining economic fluctuations. This article offers an unusual insight into the business cycle’s causes and growth theories.

Keywords

• economic fluctuations
• strategic behavior
• growth theories
• decision making
• game theory