Game Theory in Hiring
Game theory is a field applicable in many real world situations such as sports matches and auctions. It can also be used by companies to figure out the best way to run things. When finding a new employee a company must weigh the risks and rewards of bringing that person onto the team. This is a game where the company must find the best strategy. Right off the bat, it seems that the top strategy would be to always choose the best performing candidate, but according to this article there is sometimes a better strategy.
Awarding a job or promotion to a person who has previously done a good job is sometimes the best strategy. FAs the article states, the payout for not choosing the best person, can be larger when the other person has done well in in the past. This is because the person feels they are being rewarded for past work and therefore will work harder in the future. This is one of many examples where one strategy seems the best until you analyze it using game theory principles.
https://insight.kellogg.northwestern.edu/article/establish-credibility-to-motivate-employees