Game Theory in Real Life
Whether we notice it or not, we use game theory in our everyday lives. While game theory is often considered a topic of economics, one can see that game theory is actually used across all different aspects of life. The article, “7 Easy Ways To Use Game Theory To Make Your Life Better” discusses the idea that we, as individuals, can incorporate game theory in many of our everyday tasks. For example, the articles begins by discussing game theory in salary negotiations. The article suggests that according to game theory, when an individual is negotiating their salary, it is better for them to negotiate with one partner rather than trying to negotiate with multiple people. This is because when more people get involved in negotiations, the more complex the “game” becomes. Furthermore, this article explains how we can use game theory to save money when buying a car. The article states that when buying a car, an individual will first call up a number of dealerships and tell them that they will buy a car from whichever dealer offers them the lowest price. In the case that one of the dealers says they can’t negotiate over the phone, the buyer will tell that dealer that they know negotiations can occur over the phone because they have seen it done before. Therefore, the dealer would then try to beat the other competing dealers by offering a lower price than originally offered so that this dealer could guarantee his sale. Lastly, the article poses another situation in which game theory is used, but this time it is discussed in terms of poker. The article explains that the individuals playing should always go with their optimal strategy because this strategy is more likely expected to yield the best results.
This article relates to what we have been discussing in class in terms of all the different “games” that can be played in game theory. Specifically, it relates to what we learned about the prisoner’s dilemma game. While learning about the prisoner’s dilemma we discussed the importance of a dominant strategy. A strategy is said to be dominant if it is the best response to every strategy. This can relate to the poker example given in the article which states that players should always go with their optimal strategy because this strategy is likely to yield the best response. Overall, I find it very interesting to see topics we learn in class, like game theory, be directly applied to real life situations. What’s more is I find it easier to understand these game theories when they are explained through real life examples.
https://www.businessinsider.com/how-to-use-game-theory-to-your-benefit-2012-4