Game Theory is one of the theories which has led to historical changing of the world’s economy. Even though it’s very complicated in terms of layman understanding. It’s notable that understanding of Game Theory gets easier when its quantified in the form of “Trust”. One can relate to game theory while making a rational decision. Then again, it cannot be implied or practiced by the certain set of people due to their emotional intelligence at the same. Furthermore, the point of the Game theory comes into picture while assigning itself to the concept of business and its rules. Leading that not all businessman can be good as it said to be in Game Theory. Because everything leads to the concept of Trust and Decision making.
So why is Game theory a very important concept?
Technically if one needs to understand the importance, it can be set to provide a better mechanical design friendly, to set the general equilibrium of the economy and for a better decision making.
Thus saying that the world can be turned into a better place through game theory
Now if you want to break it down into pieces and apply it accordingly.
- Decision making : The formation of decision making is usually influenced by preferences and the belief system which one coheres. This talks about one individual taking a decision rationally by making sure that his preference and belief is same as the economy demands it to be
- General Equilibrium: This part of theory talks about consistency in trade and production. Especially when there is large buyers and the demand factor is more. This is influenced and also protected through economic policies to substantiate the economy. It becomes a part and parcel of the game theory
- Mechanical Design Theory : Game Theory applies rules which is given and establishes itself with no changes given to it. Whereas Mechanical Design Theory speaks about how it generally can be modified to bring a certain changes. This includes Wage Agreements,Compensation related segments
In order to instruct this theory in examples,
One can consider the game Chess
There are two players A and B
Once the two players are set to play against each other. They both can cheat at the same time or cooperate together to win the game. But then again it depends upon the opponent player on whether he would like to cheat or cooperate. Once there is a cheat, the consequences can be irrational to the base idea. That is..
If A cheats, B would be let down thinking A is cooperating
If B cheats A , A can amount to think that cheating is must
If A doesn’t cheat but cooperate yet the B does the same. The result is the previous outcome proving that pointers of A having more lead than B due to cheating.
Moreover the results can be tie where it can benefit the both players
Second example is about a prisoner C and Prisoner Z
Prisoner C and Prisoner Z are in prison for certain crime. This prisoner’s dilemma can lead to four outcomes which is explained pictorially.
The outcomes can be negative but its like playing tic tac toe in a game. This can be implied in any outcomes of sports.
Since this is gist of it!
Please do check the Game theory section of The Economist
And also for more better result to understand further, one can play the interactive game of trust through this link http://ncase.me/trust/
Hopefully, this helps out to those who are curious about Game Theory