{"id":4620,"date":"2023-04-13T09:16:06","date_gmt":"2023-04-13T09:16:06","guid":{"rendered":"https:\/\/prosperity.newai.com.au\/?p=4620"},"modified":"2025-04-13T10:45:30","modified_gmt":"2025-04-13T10:45:30","slug":"strategic-dilemma-in-round-2-game-theory-meets-algorithmic-trading","status":"publish","type":"post","link":"https:\/\/prosperity.newai.com.au\/index.php\/2023\/04\/13\/strategic-dilemma-in-round-2-game-theory-meets-algorithmic-trading\/","title":{"rendered":"Strategic Dilemma in Round 2: Game Theory Meets Algorithmic Trading"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"4620\" class=\"elementor elementor-4620\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-96a3f3b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"96a3f3b\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-7bfc245\" data-id=\"7bfc245\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-5c92a76 elementor-widget elementor-widget-text-editor\" data-id=\"5c92a76\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.6.7 - 03-07-2022 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#818a91;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#818a91;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p>Round 2 was extremely time-constrained. For the algorithmic portion, my approach was essentially as described in my previous post. The manual trading component, however, proved more tricky.<\/p><p>The manual trading mechanism worked as follows:<\/p><p>\u2981 Each participant submits a price between 9000 and 11000<\/p><p>\u2981 If your price is below the median of all submissions, you get to trade<\/p><p>\u2981 You sell at your submitted price and buy back at the average price of all qualifying traders (those below median)<\/p><p>\u2981 The trade quantity is fixed at 300<\/p><p>Theoretically, the optimal strategy is to submit a price just below the median to maximize profits. The profit distribution follows this pattern.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-ed70edd elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"ed70edd\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-451fc69\" data-id=\"451fc69\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-ce274cc elementor-widget elementor-widget-image\" data-id=\"ce274cc\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.6.7 - 03-07-2022 *\/\n.elementor-widget-image{text-align:center}.elementor-widget-image a{display:inline-block}.elementor-widget-image a img[src$=\".svg\"]{width:48px}.elementor-widget-image img{vertical-align:middle;display:inline-block}<\/style>\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"1440\" height=\"771\" src=\"https:\/\/prosperity.newai.com.au\/wp-content\/uploads\/2025\/04\/8-2.jpg\" class=\"attachment-full size-full\" alt=\"\" srcset=\"https:\/\/prosperity.newai.com.au\/wp-content\/uploads\/2025\/04\/8-2.jpg 1440w, https:\/\/prosperity.newai.com.au\/wp-content\/uploads\/2025\/04\/8-2-300x161.jpg 300w, https:\/\/prosperity.newai.com.au\/wp-content\/uploads\/2025\/04\/8-2-1024x548.jpg 1024w, https:\/\/prosperity.newai.com.au\/wp-content\/uploads\/2025\/04\/8-2-768x411.jpg 768w\" sizes=\"auto, (max-width: 1440px) 100vw, 1440px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-a4e5dc2 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"a4e5dc2\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-cc8eed4\" data-id=\"cc8eed4\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-f342274 elementor-widget elementor-widget-text-editor\" data-id=\"f342274\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>This resembles the classic game theory problem of &#8220;guess 2\/3 of the average,&#8221; where a Nash equilibrium exists but is nearly impossible to achieve in initial attempts. Research shows that in real-world experiments, results typically converge to about two levels of reasoning:<\/p>\n<p>1. First-level: Uniform distribution \u2192 median at 10000, buyback at 9500<br>Profitable range: 9500-10000<\/p>\n<p>2. Second-level: Assuming others think like first-level \u2192 median at 9750, buyback at 9675<br>Thus, submitting between 9675-9750 seems reasonable<\/p>\n<p>However, Discord discussions revealed most participants planned to submit 10000+, as:<\/p>\n<p>\u2981 The Nash equilibrium is everyone submitting 11000<\/p>\n<p>\u2981 No individual has incentive to submit lower prices (would lose money)<br>This makes the actual outcome harder to predict<\/p>\n<p>Round 2 will likely reshuffle rankings significantly because:<\/p>\n<p>1. Algorithmic trading:<\/p>\n<p>\u2981 Some may achieve huge profits by simply betting on price movements<\/p>\n<p>\u2981 Conservative pair trading might cap at ~50k<\/p>\n<p>2. Manual trading:<\/p>\n<p>\u2981 High luck factor &#8211; guessing right could yield 250 profit \u00d7 300 = 75k<\/p>\n<p>\u2981 Typical algorithmic profits per round are only ~30k<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Round 2 was extremely time-constrained. For the algorithmic portion, my approach was essentially as described in my previous post. The manual trading component, however, proved more tricky. The manual trading mechanism worked as follows: \u2981 Each participant submits a price between 9000 and 11000 \u2981 If your price is below the median of all submissions, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4537,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-4620","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-2023r2"],"acf":[],"_links":{"self":[{"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/posts\/4620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/comments?post=4620"}],"version-history":[{"count":7,"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/posts\/4620\/revisions"}],"predecessor-version":[{"id":4628,"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/posts\/4620\/revisions\/4628"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/media\/4537"}],"wp:attachment":[{"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/media?parent=4620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/categories?post=4620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prosperity.newai.com.au\/index.php\/wp-json\/wp\/v2\/tags?post=4620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}