💸Economic Concepts

What Inspired Pool Party?

The Pool Party game incorporates a number of economic concepts that are useful for analyzing the behavior of players and making strategic decisions that maximize profits. Specifically, the game is designed to reflect both the Cournot and Nash equilibria. These concepts highlight how each player must choose a strategy (Pool) that maximizes their own utility (APY) while also considering the strategies of other players.

Cournot Equilibrium

The Cournot equilibrium occurs when each player is choosing a strategy that is best for them, given the choices of the other players. This equilibrium assumes that each player is acting rationally and is aware of the choices of other players.

Nash Equilibrium

In contrast, the Nash equilibrium occurs when no player can improve their own utility by unilaterally changing their strategy. This equilibrium highlights how players must take into account the choices of others and anticipate their responses to maximize their own utility.

Utility Maximization

To represent the utility that a user derives from each Pool in the Pool Party game, utility maximization curves and production-possibility frontiers are useful tools. These concepts help to show how different APYs, lock-up durations, and risks associated with each Pool affect the overall utility derived from each Pool.

Summary

Players must also consider the lock-up period, the ability to hop Pools, and the 1% fee for unstaking which adds an additional layer of complexity to the decision-making process. The varying APRs for Pool A and Pool B based on the amount of tokens staked in each Pool create a dynamic and competitive environment for players. In this game, there may be multiple Nash equilibria, depending on the choices of the players. For example, if a large number of users choose Pool A, the APR for Pool A will decrease, making Pool B more attractive, and vice versa.

Overall, the Pool Party game is a practical example of how economic concepts can be applied in large multiplayer economic games. By considering these concepts and the strategies of other players, users can make informed decisions that maximize their own profits while contributing to the overall success of the game.