Game Theory

“You don’t have to be a mathematician to have a feel for numbers.” – John Forbes Nash, Jr.

Game is a form of competitive activity played according to rules. But this is just a definition of the game and the most crucial point is that one can’t make strategies just by knowing the rules but one can easily approach self to strategies by watching actions taken by other players. And game theory is a framework to aid decision making in that case.

Basically game theory is the phenomenon which combines psychology, mathematics, philosophy and an extensive mix of other academic areas. And most interesting fact is that eight Nobel prizes have been awarded to those who have progressed that discipline. But beyond the academic level this theory actually applicable to today’s world.

Game theory in the business world arises when there is oligopolistic market. And an oligopoly is a market structure in which a few firms dominate. The products the firms offer may be identical (as in perfectly competitive market) or differentiated (as in monopolistic competitive market). Game theory has also encompasses various business disciplines like optimal marketing campaign strategies, waging war decisions, ideal auction tactics and voting styles. The crux of game theory is that it provides a hypothetical framework with material implications. E.g. Technology companies consistently face decisions regarding whether to market an Operating System immediately and gain a competitive edge over rival firms, or prolong the testing period of that Operating System. So game theory provides the base for rational decision making.

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