Game Theory...

So the excersise today in class was to maximize profits for our respective businesses. When we started I immediately thought of the concept of game theory. I thought of this because of the four choice scenarios that were given before me. It jogged my memory of game theory and how it worked. Reminding myself of what it was. So lets go over the actual definition of game theory. According to Merriam Webster it is the analysis of a situation involving conflicting interests (as in business or military strategy) in terms of gains and losses among opposing players. So the game theory is mainly concerned with gains or loses, and if we apply it to the in class exercise we find that we only have gains or loses in terms of profit earned. The game theory model was extremely helpful within this exercise. It can also be applied to other situations that may have a loss or gain option within them. Another situation it could be applied to would be collusion. Price collusion in the United States is illegal, and thus game theory starts to take its roles within setting prices. If the price game is played multiple times then the businesses who are playing are going to eventually settle on a mutually beneficial price scheme. It will make them the most profit and thus they will both cooperate with each other to fix the price. The example for this was highlighted in class as gas stations. They signal each other in order to place their pricing very close to each other and this gives them a competitive edge against the consumer. Game theory has many applications and only a few have been discussed here. It is a very convenient tool for making decisions and should be used to decide certain outcomes of situations