Question

Define game theory and apply the game theory matrix diagram to illustrate and explain a strategic decision you have made recently.

Answer 1

To put in simple terms, Game Theory could be viewed as the science of taking decisions through a player's best strategies when the other player(s) decides to select their best strategies(property of being rational). This is done to maximize payoff.

	Metro	Bus
Metro	2,0	1,1
Bus	1,1	0,2

In the above matrix form of a game , where me(row player) and my friend(column player) wanted to commote back home from work is represented as a game.

My house is closer to the metro stop , while his house is closer to the bus stop. But we would both like to travel back home in the same commute. So , even though my best payoff was to take metro together with him, that would have not been a profit for him. Hence, the game had a Nash equilibrium when I chose the metro and he chose the bus. So, that's how I decided my strategy based on the fact that me choosing bus as a strategy was strictly dominated .