![]() ![]() ![]() Generally, game theory is easiest to apply to two-person or two-organisation games, with just a couple of alternative actions, because it keeps things simple. It is therefore perhaps best considered as the science of reasoned decision-making, or logic applied to decision-making. It was originally applied to situations where one player had to win and others lose, but it is now used more widely for all kinds of cooperation behaviour. It applies mathematical modelling techniques to the study of human behaviour, and particularly to conflict and cooperation. Game theory started out as a look at how people behave when they are playing games. They compromise, and accept a lesser outcome, for example, to avoid conflict, or because the consequences of poor behaviour are too extreme. They may, therefore, end up with a less optimal outcome, simply because they know how others are likely to behave. The principle behind game theory is that people behave rationally, and make decisions based on the best possible outcome for them, given the likely behaviour of others. Game Theory is a technique used to understand how and why people make rational decisions.Īlthough often considered applicable to economics, it has also been used in biology to understand evolution, and more recently applied to business and decision-making by customers and others. ![]()
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