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Game Theory for Business Decisions Essay

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Game Theory for Business Decisions

Assignment 2










29 October 2008

Game Theory for Business Decisions


Introduction

I think that using the game theory is crucial to take decisions and to head in a correct direction, but for this to happen you need to use strategy because it not depends fully on you, you need to interact with other players that have their own priorities and might not be the same as yours. In order to get the most efficient and best suited results you need to find equilibrium.

There are two main branches of game theory: cooperative and noncooperative game theory. Noncooperative game theory deals largely with how intelligent individuals interact with one another in an effort to achieve their own goals, and cooperative finds the famous Nash equilibrium.

Body

Game theory is the study of the ways in which strategic interactions among rational players produce outcomes with respect to the preferences (or utilities) of those players, none of which might have been intended by any of them.

In more explicit words Game theory is a branch of applied mathematics that is used in the social sciences (most notably economics), biology, engineering, political science, international relations, computer science (mainly for artificial intelligence), and philosophy. Game theory attempts to mathematically capture behavior in strategic situations, in which an individual's success in making choices depends on the choices of others. While initially developed to analyze competitions in which one individual does better at another's expense (zero sum games), it has been expanded to treat a wide class of interactions, which are classified according to several criteria. Today, "game theory is a sort of umbrella or 'unified field' theory for the rational side of social science, where 'social' is interpreted broadly, to include human as well as non-human players (computers, animals, plants)" (Aumann 1987).
Traditional applications of game...

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