Real-life Examples Example #1 Picking a school wasn’t just a matter of figuring out which schools were good: Because students had to think strategically and anticipate which choices others would make, it was a real-world exercise in game theory. We will now demonstrate two (less trivial) examples of using iterative removal of strictly dominated strategies to simplify games. In looking at game theoretical applications in the real world, two models from Schelling and Shubik will be discussed. There are multiple real-life examples for understanding the basic concept of game theory. The Prisoner’s Dilemma, a book by William Poundstone based on the work of John von Neumann, describes the evolution of the game theory, and the eventual development of the ‘Prisoner’s Dilemma’ at RAND Corporation. One example comes from the Ultimatum game . Although the aspect of game theory is more apparent in some examples compared to others, there is still an aspect of it in most decisions we make. Our first example is a classic game known as Prisoner's Dilemma: We begin by considering Player 1's options. A variety of research has shown how the decision making process within games can be delineated and understood in greater detail thanks to devices like eye trackers, GSR sensors, facial expression analysis, and EEG. As both firms have a stable market reputation, the advertising costs are a direct drain on the net corporate profits. Ultimatum game; Dictator game; Game Theory and Human Behavior Research. If Player 2 were to choose to be 'Silent', Player 1 would be better off by 1 if he chose to 'Betray'. There's a lot of economic research out there on it, but for a nice non-academic read, there is a chapter on it in Soccernomics - interesting fact I learned is that some soccer clubs consult economists in the event they have to do a penalty-shot. Penalty shots in soccer are perhaps one of the most clear and intuitive real-life example of game theory. Other examples of using game theory to make a decision in everyday life is when to change lanes in traffic, when to ask for something, or even when to wash the dishes. Game Theory uses mathematical tools to find solutions in situations where interdependent parties make strategic decisions. Why You Should Understand & Study ‘Game Theory’ If You Are In Business? Let us take up a simple one: Apple and Samsung involved in a ‘game of advertising’. Impact of Game Theory. Examples of Game Theory. Many developments in this field are quite recent and there is a wealth of material for curious minds. Before we talk about Game Theory, we need to first understand the idea behind oligopolies.
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