Game Theory Fundamentals

Game Theory: Understanding Your Decision Context

What is game theory? What economists call game theory; psychologists call "the theory of social situations". game theory predicts how intelligent individuals, or intelligent groups, interact with one another in an effort to best achieve their own goals and objectives.

Predicting the Natural Outcome

In any situation where multiple parties are seeking to maximize their own benefits, there is a natural outcome - an inevitable sequence of events that will play out over time. In the end, some parties will gain advantage and others will suffer the consequences.

Achieving Your Optimal Outcome

This is where game theory gives decision makers an edge. Faced with a complex strategic decision - one that involves a variety of risky alternatives to choose from and a number of influential players - game theory can be used proactively for:

• Assessing the desires of other players,

• Predicting the likely actions they will take,

• Predicting the likely sequence in which actions will occur, and

• Taking proactive steps to ensure your company achieves the best outcome possible, given the circumstances. Based on economic decision theory and mathematical probability theory, game theory is a useful tool for modeling decision scenarios and assessing the desired outcomes and likely outcomes of all players. It provides the right amount of decision making support needed to maximize the outcome of your decision scenario.
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