Game Theory Concept

Introduced in the 40’s by John von Neumann and Oskar Morgenstern through the book “The Theory of Games and Economic Behavior”, the Game Theory is used in situations which involve two or more deciders with antagonistic goals to analyze the results of their strategic interactions. The Game Theory can be used, for example, to study interactions between companies in oligopoly markets, in negotiation processes between countries or trade unions and employees, and even in situations of armed conflicts.

A practical way of representing the interactions between deciders is through the double results entry matrix. The number of possible results will correspond to the number of participants multiplied by the number of possible strategies.

The great news brought by the Game Theory is the fact that the participants don’t only think about their own goals but having to also think in the goals and actions of its opponents and take their own decisions taking them as base.

 

 

Translated from Portuguese by Susana Saraiva, Portuguese-English and English-Portuguese translation specialist. Contact: spams@sapo.pt.