Start from old age civilization human being introduced a culture of business that includes only exchange of one necessity to another. And as we were developing through centuries business and its meaning was growing parallel to it with many dimensions. Now it is not sufficient to say that a business is only making profit or growing one’s asset, it has come with anew society with different organizations as its citizens and trying to develop its own position in this world, which is of course under the hand of human being.

With growing competition among his organizations, they all are trying to move with a strategy, which is dominating and making their position strong. That’s why we can correlate it with different games we play like chess, poker, cards and many others where the situations and positions are changing variably and here the interest of a stubborn mathematician lies who always tries to win with a formulized moves and not with just intuition and skill. And that is the birth of GAME THEORY.

However the seeds of this theory ere present in ancient civilizations but they grew as plant in Second World War. Now in 21st century it has been growing as a tree. Which is giving us a strategy to win, where skill is not enough. First of all we will pay homage to two great mathematicians John Von Newman (Known as Father of Game Theory) and Oskar Morgansturn for their great work. One of the acclaimed example explained by them was PRISONER”S DILEMMA, which is a critical situation where two prime partners kept in different cells and interrogated. We put it under two person, none zero sum, none cooperative game with dominant strategy. The whole situation we can explain with pay off matrix.

Now we can see from this matrix that the best case is for them when they both are not confessing but its not the best strategy because in cases when the other is confessing first will get 14 year jail. Now we define a dominant strategy which says “ There is one strategy that is best for a person ,no matter what he can do .”So, we can say the dominant strategy in this case is to confess

Whenever we talk about game theory we can’t neglect John Forbe Nash, a great mathematician who in his four papers between 1950-53 in governing dynamics in games .He got his Nobel in 1974 for getting a “Nash Equilibrium” which says in a particular situation in a game, with a set of strategies for every player, such that no player has incentive to unilaterally change his action. Players are in equilibrium if a change in strategies by one of them would lead that player to earn less than if he remains with his current strategy. For games in which player randomized (mixed strategies), the expected or average pay off must be at least as large as that obtained by any other strategy. We can identify this equilibrium in different stage of business games.

In business this game theory is of great help in field of price determining oligopoly market, and making strategies and policies incompetence of different organization while in business we play and make decisions or choose strategy taking into account of the competitors move and future move with their potential choices even we take care that they are doing the same.

Game theory is still expanding its dimensions to help human being in lots of fields in international relations evolutionary biology forensic sciences and others. For the business newsmakers in game theory is going on as in different situations as like:

1. Evolution of labour market for medical interns and residence.
2. The use and abuse of game theory in international relations introducing news ways of analyzing repeated situation.
3. Modeling Rational agents and so on.

Achal Kumar Prasad.

Content is © Indian Institute of Information Technology - Allahabad
Powered by www.iiita.ac.in