How Game Theory makes life easier
As technology continues to expand we get an influx of things, and with this explosion of things in our lives we have to be able to sort through them and make choices as to what we want. While many of us use just intuition to do this, one more effective way to make choices would be to use Game Theory in our every day life. Game theory can be used to help in everything from choosing what to eat for dinner to bargaining for salary increases in a job, and can make these choices much easier if you look at them from a mathematical risk/reward standpoint rather than just choosing what your gut tells you to choose.
If you use the example of buying a car using game theory, you can put yourself in the best negotiation position by researching a number of car dealerships in the area before going to one. If you do this you can look at the risk/reward of each dealership, and have an idea of where you should stand your ground in negotiations for the car that you want. You can then inform the dealer of what you’re willing to pay for the car based on what you found in your research. You can call the dealer and demand that the deal be done over the phone and that you are in negotiations with another dealer and you will take the car from whichever dealer will give you the best price. This strategy will make the dealer go lower than they normally would. Just having a fixed price that is the one you are willing to pay, however, gives you an advantage in a deal according to an economics professor at the University of Pennsylvania. Similar to taking a dominant strategy, if you have this fixed price then there is little room for negotiation causing the dealer to have to determine how to respond to your offer rather than trying to influence you into changing your offer.
There are many applications for game theory that can make life easier. It seems to be that using your brain to weigh out decisions with mathematical type decisions will make life more pleasant and with less regret than just using your gut and hoping for the best.
Sources:
http://www.psmag.com/business-economics/nachos-versus-sushi
http://www.businessinsider.com/how-to-use-game-theory-to-your-benefit-2012-4?op=1