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Game Theory’s many applications

In class our “Networks” class we often talk about game theory and the many components that make up this theory. We learned that when a player has a strategy that is strictly better than all other options regardless of what the other player does it is called a strictly dominant strategy. Additionally, we learned that a Nash equilibrium is a set of strategies, one for each player, such that no player has incentive to change his or her strategy given what the other players are doing. In class we often applied these concepts to Auctions and Traffic but there are actually many applications of this Noble Prize winning theory. The Business Insider article by Ben Duronio titled “7 Easy Ways To Use Game Theory To Make Your Life Better” shows how game theory can be utilized in many different ways.

The article first explains John Nash’s game theory as method of strategic thinking then dives into the many interesting ways game theory can be used in our daily lives without knowing economics. One way someone could use game theory is if they are trying to negotiate their salary. According to the article, “The more people involved the more difficult it is to negotiate, so breaking negotiations down to one partner and using game theory with him is advised” (Duronio 1). This makes sense because it would be harder to reach a Nash Equilibrium if more people are involved. So Duronio suggests tackling each negotiation one by one in order to minimize the risk of getting rejected. Another, way one can use game theory in real life is when they’re buying a new car. Duronio says calling all the dealerships and asking them to negotiate over the phone is a strategy that works in your favor because all the dealerships would essentially be fighting to give you the best price without knowing their opponents actual value. Duronio also shows five other ways to use game theory in your actual life. Therefore, game theory has many wonderful applications to it.

 

http://www.businessinsider.com/how-to-use-game-theory-to-your-benefit-2012-4?op=1/#-save-money-when-buying-a-car-2

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