EXECTIVE SUMMARY

Game theory is a fascinating subject. It is applied in many various academic fields including economics, management, biology, psychology, sociology etc. The purpose of this paper is to apply game theory to problem solving and risk management. First we present briefly game theory and illustrate the relationship between game theory, strategic planning and risk management.

Game theory is combined with the theory of risk management to capture any opportunity that a business can turn the risk into opportunity. For managers who deal with a huge amount of data, game theory is simply an alternative perspective with which they can view the process of problem solving. Our study indicates
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Every organization has a mission. The head of an organizational unit must ensure that the organization has the capabilities needed to accomplish its mission.

As we all know and have heard on several occasions, “every organization has a mission”. The head of an organizational unit must ensure that the organization has the capabilities needed to accomplish its mission. This is where the game theory comes in, the game theory is not only used to predict, but to also explain, and prescribe action necessary to move forward. The game is essentially aimed to creates and capture value by encouraging players to think about cooperative and competitive ways to change the game.

The game theory was created in 1944 when mathematical genius John von Neumann and the economist Oskar Morgenstern published their book Theory of games ad economic behaviour. Till this day, their work provides a systematic way to understand the behaviours of player in situations where their fortunes are interdependent. “Game theory is a sort of umbrella or ‘unified field’ theory for the rational side of social science, where ‘social’ is interpreted broadly, to include human as well as non-human players.” (Aumann, 1987).

TYPES OF GAMES

The pioneers of the game theory distinguished two types of games, the first is rule-based games and these types of games require players to follow rules and this promotes

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