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Game theory - Essay Example
The Game theory has gained wide application on a series of fields in the corporate and economic arena today. This is largely as result of its ability to simplify matters and provide scientific backing for understanding complex strategic phenomenon. Despite these obvious advantages, the Game theory is not an all satisfying theory because it is particularly difficult to understand certain aspect strategic behaviour in firms and also the behaviour of economic actors…
Game theory is used to understand competitive situations. These are normally those scenarios in which the chances of a certain outcome largely depend on parties involved and also on a bit of chance. Consequently, the theory focuses on predicting what these respective players will do and hence the most appropriate alternative is chosen by the analyst. There is a particular mathematician who was responsible for this theory and was known as John Von Neumann. (Miller, 2003) Through his work in the mid twentieth century, the expert was able to spearhead several divisions in this interesting theory. Some of the divisions include
In the 2-person versus n-person division, the 2-Person approach largely focuses on the choices available to two players and how to bring out optimum outcomes. On the other hand, in the n - person division, great attention is given to the occurrences and coalitions that are likely to come out of prevailing circumstances. Then again the cooperative division of the game theory largely dwells on choices that are available to parties who have been bound by certain agreements. ...