Game Theory : Essential Strategic Decision Making Essay

The decisions or strategies one company chooses will likely motivate other competitors to respond. Using the game theory allows a company to assess and understand more about itself and its competitors so that it can adjust and shape the competition to maximize its win probability (Johnson, 2014). Some examples of how A&D companies apply the game theory in their decision making are:

In the next section the book presents two types of theories: game theory and behavioral theory. Game theory was created over 2,500 years ago by the Chinese military (Ho & Weigelt, 1997). It has only entered the business environment recently but still uses the same concepts and is a tool for doing strategic analysis. Game theory is essentially a way to make decisions. How will it affect your company? How will it affect your competitor? It takes into account cause and effect, considering all possibilities and what resources will be needed. The second theory offered is behavioral theory. This theory investigates why it is that managers often make irrational decisions that may negatively affect the future of the organization. Often, managers make decisions based on their own biases and not necessarily rational like the game theory.

The strategic board game, Diplomacy, focuses on wars, but more importantly the act of negotiating. The players are responsible for forming strategies by both developing and breaking alliances with their competitors. The game is set in Europe during World War I with most teams beginning with similar resources. Each player-team competes as an either Austria-Hungary, Turkey, Italy, England, France, Russia, or Germany. With at least three home-center game pieces on the board, there are strategic movements in order to control one of the eighteen supply centers. This involves phases of negotiation prior to movement of the game piece. There is no factor of luck. The main variable in the game is each team’s ability to convince the others to do what they want. The core game strategy is negotiation. This board game at times mirrors actual history and educates the players as to the method by which a world war can happen.

Game theory cannot always predict reliable outcomes for real-life situations as it is more an

The fourth step into the creation of executable strategies relies in the alignment of resources, purposes, and strategical thinking contemplations into reality. The rationale of this step is to create

Sunkist is a leading international citrus supplier, but what you might not know is that they do not own a single citrus grove, and although they are a billion dollar a year organization, you cannot buy stock-because there is none.

Efforts to model such strategic interactions has led to a whole branch of economics and math known as game theory

From a VRIN perspective, Elizabeth Arden (EA) has at least one intangible asset that is a key source of competitive advantage: strong brand equity. In the prestige perfumes and cosmetics market, having this key resource provides an edge over competitors when it comes to understanding, attracting and retaining a loyal customer base. Furthermore, having a strong brand allows EA to innovate and launch successful new products and enter new markets. Using VRIN, EA should focus more internally by expanding product development and maintaining a VRIN brand portfolio to keep up with fast moving trends within the cosmetics industry.

On balance, strategic decisions are anything but clear-cut and definitive. Quite the opposite, they represent the epitome of obscurity, ambiguity, and vagueness by executing long-term commitments today in exchange for some desired expectations tomorrow. Progressively long or extended periods of time generally exhibit

Game theory is a popular resource for modelling economic, sociological, philosophical and many other situations. The Stanford Encyclopaedia of Philosophy defines it as “the study of the ways in which interacting choices of economic agents produce outcomes with respect to the preferences (or utilities) of those agents, where the outcomes in question might have been intended by none of the agents.” Game theory has many uses, including describing and predicting ideal behaviour as discussed later on. It can be used to model and predict for example. There are, however, criticisms to game theory in regards to its ability to apply to human rationality and emotion. Due to the widespread use of game theory, this has become a popular area of research in economic, philosophic and even psychological theory.

by Jon Von Neumann, although that development involved a number of many scholars who thought collectively way back in the 1950s (Hart, 2015). The model has further been taken global with such figures like Jean Tirole, who received global attention for the Nobel Memorial Prize award in 2011. The baseline theory, and game theory are applicable in business contexts as it did for Glasberg et al (2014) research case study. For the problem statement given above, game theory stands high applicable chances based on the idea that any business has to weigh the risks involved before considering a particular strategy (Blonski & Spagnolo, 2015). Cloud computing is part of the technologies seen important in the contemporary business context. This, however, is accompanied by many risks and any organization has to determine such risks, and identify who loses and who gains in the undertaken risk.

Thompson, Arthur A., Strickland A. J., Gamble, John E. (2010). Crafting and Executing Strategy. McGraw-Hill Irwin. (Ed.) Boston

First and foremost, our first decision came with should we take it upon ourselves and plan our wedding without the assistance of a wedding planner and just take to the stage and plan it ourselves from beginning to end. Knowing that both my husband and I worked very demanding hours and schedules we wondered how we would get it all done. On my end, I was all for paying someone else to facilitate and coordinate our wedding and take our thoughts and dreams and turn them into reality. However, my husband was looking at not hiring a wedding planner more so from the perspective in sparing our budget and saving more money and he thoroughly believed the money spent on the wedding planner could 've been spent elsewhere as he thought my work in event planning would prove sufficient enough. Despite, the fact that I worked just as many hours as he did, I did not think this was the correct path to take in this decision. I was at the point of just paying the money and allowing someone else to take care of the many details so we can fully enjoy ourselves in

First let us discuss the basics of game theory itself. Game theory is defined as “the study of mathematical models of conflict and cooperation between intelligent, rational decision-makers”. (Myerson, 1991) Also called ‘strategic decision making’ game theory is essentially studying the decisions that people will make in interactive situations with given inputs and outputs. Game theory is based on the principles that players will act logically and that players are looking out for their own interests; basically it assumes that players are trying to maximize their personal gain by using strategy. Game theory helps us better understand human decision making by focusing on the rational aspects of decision science.

The Prisoner’s Dilemma is a mathematical game theory that refers to a game in which the payoff from playing the dominant strategy is not the highest payoff possible and illustrates how self-interest can lead rational individuals and companies to pursue a course leading to mutual self-destruction, even when that destruction is foreseeable or in the case of companies certain decisions could have financial impact for better or worse. It seems that the Prisoner’s Dilemma impacts the many small decisions we consider making. The dilemma provides the logical framework for many situations we face every day in real life. Whether we're competitors conducting business, spouses