Gamę Theory

In the last twenty-five years, game theory has been applied to a growing number of practical problems: from antitrust analysis to monetary policy; from the design of auction institutions to the structuring of incentives within firms; from patent races to dispute resolution. The purpose of Game Theory and Business Applications is to expand these applications of game theory into a broad and meaningful view of the way business decisions can be modelled and analyzed. The chapter contents embrace a wide variety of business functions - from accounting to finance, to operations, to strategy, and to organizational design. In addition, specific application areas include numerous kinds of market competition, bargaining, auctions and competitive bidding. All of these applications involve competitive decision settings, specifically situations where a number of economic agents in pursuit of their respective self-interests take actions that together affect all of their fortunes. In the language of game theory, players take actions consistent with the given `rules of the game,' and these joint actions determine final outcomes and payoffs. As this volume demonstrates, game theory provides a compelling guide for business strategy.

Game theory has revolutionized the study of animal behavior. The fundamental principle of evolutionary game theory–that the strategy adopted by one individual depends on the strategies exhibited by others–has proven a powerful tool in uncovering the forces shaping otherwise mysterious behaviors.