Game theory can be applied to lots of real life situations. Put simply, the theory helps explain how people interact in key decision-making processes. Various other assumptions and requirements may be necessary depending on the game theory’s model.Ĭonfused? Well, let’s simplify it a bit: Game theory is often used to figure out the best solution among the best possible outcomes by analyzing the cost and benefits that each player or participant (who compete with each other) stands to gain. The game dictates the participants’ identities and preferences as well as the allowed strategies and how they affect the outcome. In most cases, the outcomes are not necessarily intended by the players. The primary focus of game theory is the game, which often act as the model of an interactive situation among the participants.Īnd the key to game theory is the fact that one participant’s or player’s playoff is often contingent on the other player’s implemented strategy. It can also be considered to be a science of strategy or to some extent-the optimal decision-making of competing but independent actors in a strategic setting. Game theory is a process or framework that defines how several interacting choices affect the outcome of something.
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