A game theoretic approach on the investment in economic sectors by multiplier analysis: case study of Iran's economy

There is a debate on how the amount of capital should be invested in economic sectors to achieve the most prosperity in the economy. According to the balanced growth theory, some economists believe that large investment in different economic sectors increases productivity and the production size. However, other economists cling to the belief that limiting investment in key economic sectors results in increasing production and accordingly household income will increase by dispersion of production through the economy. In this article, the game theory approach is utilised by using multiplier analysis and the matrix derived from the input-output table. This method is the middle ground between the balanced and unbalanced growth theories and benefits from them. The results obtained from applying the new approach in the economy of Iran indicate that it is more profitable to invest in different economic sectors; however, the investment should be in accordance with the contribution of the economic sectors in the production process, each of which is in accord with the balanced and unbalanced growth theories, respectively. In conclusion, applying the game theory approach in the economy of Iran increases the scale of economic production and prosperity.