Game theory, is it related to gaming may be NO or might be some theories proposed for winning a game. Does it come with strategies?…ha wait I heard about this term in the movie “A Beautiful Mind”(a stellar movie based on the life of John Nash)!!! I know at this time most of you are just busted with too many thoughts running in your mind.
Well, for most of you who don’t know what is game theory – here’s a short definition for it: “Game theory can be defined as the study of mathematical models of conflict and cooperation between intelligent rational decision-makers. Game theory provides general mathematical techniques for analyzing situations in which two or more individuals make decisions that will influence one another’s welfare.” as given by Roger B. Myerson.
Any game for that matter can be modeled as a mathematical model and strategies can be applied for the payoff (think about the winning team in football or cricket who most likely always win the game – what could be their strategies for winning?)
Think about companies like Apple, Google and many successful software companies. What is that keeps them going even in a turbulent economy? Their success should be revered. Are these mathematical models really helping firms like Apple to sustain and compete with their co-players in the market?
Sometimes a device like laptop/PC alone would be useless without its complementary services. It’s worth can only be realized with an Operating System like Microsoft Windows, Linux and others.
One should consider "bandwagon" effect: As lot many users start to buy your product then the product value will increase, in turn you see great demand for people wanting to buy your product. This is where a winner strongly occupies a market.
You see the application of game theory techniques in bigger companies like Apple, Google, Microsoft and others. Sometimes you see companies coming up with similar products almost at the same time. It is very obvious that companies have continuous curiosity about the upcoming products of their competitors.
These companies never give up their ubiquitous business for what they are for with rest being assured as a protective/invasive strategy in their terms. Oh this reminds me of the wars wherein every country comes up with a defensive stance and powerful destructive weapons to snap out their enemies.
Indeed such circumstances often favor each one to conquer each other’s profit by entering into others territory. This is indeed an unexpected behavior and also a complex situation. In case we go by the assumption that other players are doing likewise, then either of the player(s) will have to face the catastrophic loss.
One such complex situation is the recent Apple-Samsung patent lawsuit. You can read here from the Cornell University blog:
We all know that Apple won the lawsuit against Samsung. However, they will have to keep up their race in innovation otherwise Android is soon going to be the killer mobile OS everywhere. Steve Jobs, the co-founder of Apple mentioned it in one of his speeches. Refer this CNet news:
I often wonder is game theory limited only to gaming engineers and academia, it would be great to make use of their knowledge in business related cases - How many companies out there hire game theory specialists at company, department and project level?
In my opinion, game theory should not just be limited to academia and research. It needs to be used regularly when it comes to decision making in a profitable organization.
Can game theory actually solve all of the business cases? Not 100%. One should be able to think beyond the rational behavior of the players at times and work on possible human behaviors too. In real world these paranoid behaviors change the Nash equilibrium that one needs to adapt and revise their strategies beyond the suggestions made by game theory.
