Question

what is outcome of Game Theoretic Decision Making in the economics.

Answer 1

Game theory is actually the study of decision making in strategic manner which makes the psychology, philosophy and mathematics together. Game theory is applied in a number of day today life systems such as finance, politics, business etc...

The scientist proposed that a game has three possible components and they are players, strategies and payoffs. Game theory applies to games involving two or more players and they should the rules and regulations, available strategies and payoffs of that particular game. However it is not true that all the players have perfect knowledge about these elements.

Strategies are the actions that players take in a game. Strategies are the heart of game theory. The concept of strategic interdependence is that the actions of one player influencing the actions of other players is one important aspects of all game theory that still relevant today.

The payoffs are described as the outcome of strategic actions applied by the player. The payoffs could be wide range of things depending on the game. It could be profit or getting a great deal on some money worth items.

The game theory is used to forecast the after effect of some multiple firms where the strategic action of one firms impacts the other firm's payoff. Thus many large companies use this theory to take highly risky decision or strategies to compete among its competitors. A various number of games can be used based on the players, strategic situation and available knowledge. Game theories are worth only if the managers knows the positive or negative payoffs that can occur as a result of the strategic actions.

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