The Game Theory, Its Influence in Strategic Decision-Making

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The Game Theory rightly justifies that strategies, tactics and actions don´t depend only on rational optimizing behavior and competition in markets, rather these are strongly influenced by the possible behavior of others.

This theory has been analyzed by emblematic examples such as the prisoner’s and the trolley dilemma, which apply to everyday situations.

The strategic essence and the principles of the Game Theory support the long-term engagement of the parts, in order to achieve the best possible agreement, combining this perspective with the integrative approach of negotiations (win-win).

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The Game Theory was designed in 1944 by Morgenstern & von Neumann and has been complemented by various prominent economists and mathematicians (awarded with the Nobel Prize in Economics, due to their respective contributions to this scientific branch).

This theory rightly justifies that the strategies, tactics and actions do not depend solely on the rational optimizing behavior of the agents and the competition in the markets, rather they are strongly influenced by the possible behavior of others.

The principles of the Game Theory are: a) make decisions based on the circumstances and the behavior of others, b) apply the strategies of cooperating or not cooperating, and c) reach a microeconomic equilibrium.

Likewise, this theory has been analyzed through emblematic examples such as the prisoner’s and the trolley dilemma, which apply to everyday situations (two groups of buyers in an auction, two corporations in a competitive market, two political parties in a parliamentary vote, two nations at war and even includes the decisions that corporate managers must face due to the possible reactions of investors, among others).

In addition, the extensions of the Game Theory are: a) the Auction Theory (which also explains the fluctuations of prices in the stock-markets), and b) the Gamification (in its two modalities, academic and managerial). Although the dynamics of the popular monopoly game contradicts this theory, constituting its antithesis.

Rolando José Olivo

Systems Engineer with 3 postgraduate degrees: Master in Applied Economics, Diploma in General Management and Specialization in Social Programs Management (Summa Cum Laude).

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