Describe The Game Theory: The Study Of Individual Conflicts

Game theory
Name
Professor
Institution Affiliation
April 18, 2017
Game Theory
Game theory is the study of individual conflicts and cooperation in a competitive situation. It can also be defined as a strategy science or the optimum decision making of competing firms in a strategic setting (Colman, 2016). The theory brings about a language and a structure that is used to make logical decisions in competition.
In this case, company A and B are supposed to make a decision concerning their profits. When company A decides to advertise, it will earn more profit than Company B and the same will happen if company B opts to advertise their goods. In a case where both companies decide not to advertise, their profits will be equal. Therefore, the two companies should come to a decision so that they both can gain the profit.
Their decisions will be influenced by the game theory since it gives the two companies an opportunity to make decisions. In the game theory, the two decision-makers must look into the effects of the made decisions and whom their decisions are primarily affecting. The two competitors ought to sit down and come to an agreement on the way forward. Well, the conversations may fail due to one company’s personal interest where one of the two companies may want to earn more profit than the other. However, if the negotiation is conducted in a formal application to the two companies’ strategic acts, it may be successful. The two actors ought to know how each decision they make influences the outcome of the game and what the aim of the decision ma...