theory is a theoretical framework which lays out the possible
strategies of players in order to maximize the most potential out of all
options. Game theory is used in economics and business in regards to
pricing competition, product releases, investments, and etcetera. Game
theory lays out all of the strategic choices that a business or economic
agent can take in relation to competition; game theory is the analysis
of competing behaviors of different parties and possible outcomes of
decisions made. A classical game theory is only regarding socially and
temporally individual instances. The players of a classical game theory
are fixed throughout the “game”, and they are meant to choose the
opportunity with the most payoff maximization.
theory is more of a general concept which incorporates rational
decision-making as a business or entity and provides understanding for
corporate’s strategy; however, it does not entirely cover all aspects
that may come into play. Game theory is more of a hypothetical framework
for basic strategies, and only works at its best when in an economic
situation with limited competition. However, game theory is widely used
as the starting concept of competing behaviors between entities in many
different areas of economics.
prisoner dilemma helps two parties reach a conclusion for both of their
best suboptimal results as a combined effort and decision. This is
similar to bargaining in order for both parties to benefit from a
business contract. The prisoner dilemma is the combination of both
competition and partnership which results in the best course of action
for both of the two. The prisoner dilemma should be used when the
outcome of collaboration between the two is more beneficial to both of
them than pursuing their own path. If the payoff is less when one is
working individually as a business than a payoff through collaboration,
than the businesses should consider the prisoner dilemma.
Don, “Game Theory”, The Stanford Encyclopedia of Philosophy (Fall 2021
Edition), Edward N. Zalta (ed.), URL =
Peer two: Game Theory is the formal study of decision-making where several
players must make choices that potentially afect the interests of the
other players. This game is described as a traditional presentation of a
calculated situation, and that one company’s actions have backlashes on
another company – it is a study of conflict and cooperation. The
decisions are called games, and the individual’s/organizations are the
players. It tries to find out the action that a player should perform
that will maximize their chances of success both mathematically and
Game Theory assumes that all players in the game are rational
and are capable of making rationally well thought deisions. It is also
used to analyze situations in which multiple companies are competing
against one another. The actions of one company are influenced by the
actions of the other paticipants. So, if a competitor lowers the price,
the other companies might be forced to do the same. It’s a rewards and
punishment game with the rules known by everyone. But, it will never be
able to predict human behavior with 100% accuracy. Game theory is
applied for determining different strategies in the business world.
Yes. Game Theory does support the corporate’s strategy.
Compaies are increasingly utilizing the science of game theory in
helping them make high risk and high reward strategic decisions in the
very competitive markets.
Prisoner Dilemma is used in a decision-making situation. In
reality, a perso who is only interested in getting the maximum benefit
for themselves would generally prefer to defect rather than cooperate.
It is basically used in aiding a decision-making in a number of areas on
our personal lives such as buying a car or in negotiating your salary.
It helps us to understand the relative payoff of cooperating verses
Hayes, A., (April 28, 2021) What is Game Theory? https://www.investopedia.com/terms/g/gametheory.asp
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