From Theory to Practice- How the Game-Theory finds its application

Since we talked about the Game-Theory and the different behavior options of individuals participating in the game, it is interesting to investigate in which different fields of interest the theory finds its application. Consulting outfits are developing Game-Theory software’s based on mathematical stings  and probabilities which predict decisions that companies or individuals will take in order to achieve their greatest interest. These predictions are based on the assumption that decisions are rational and not emotionally biased, which can be challenging in political matter. According to the article: “Game theory in practice” (The Economist, Sept. 3rd 2011) the Game Theory and computer simulations are mainly used for law firms, companies and governments. Even though the Game-Theory is mostly used for economic purposes, there has been some application in the military field as well. In 2007, America’s military evaluated the impact of moving military bases closer to North Korea through the Game-Theory or it helped to solve the terrorists hideout of Osama bin Laden. We can see that the Game-Theory plays a significant role in negotiations and strategic decisions and helps to find optimal solutions for various parties.

In the future, software specialists plan to develop a software which can assist in negotiation and mediation. Complicated negotiations can be solved through a neutral mediator, a computer and not having human beings involved. Providing a catalog of well-chosen questions paying attention to personal evaluations and esteem could help to find optimal solutions based on the Game-Theory. Overall, there are many fields where the Game-Theory should be operated, helping to find the best solutions, to save money and to avoid wrong decisions in the long run.

The Economist, Sept. 3rd 2011 , http://www.economist.com/node/21527025

Anna-Marie Tunger

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One thought on “From Theory to Practice- How the Game-Theory finds its application”

  1. Great post!

    It seems to me that game theory is inherently an innate human issue. For example, in the prisioners dilemna, it seems obvious that there is a dominant strategy, however, not everyone always picks it. It seems difficult then to assume that computers can take over the role of game theorists, because despite what any computer says, there is a person who has to make the final call. That final call involves much more than the economic outcome: ego, generosity, fairness, reputation, etc.

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