A good strategy helps the employees to work on guidelines without knowing the problem. It clearly states the actions that need to be taken under specified conditions. http://www.researchomatic.com/Game-Theory-53238.html

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Description:
Game theory is a tool that determines strategic interactions, where the result of one’s choices is
dependent upon the choices of others. To implement game theory, there has to be two important
layers who should evaluate each other’s actions when making their own strategies. It is important to
understand one another’s actions otherwise standard decision analysis problem would arise, which in
turn will formulate a bad strategy. For instance, if a company cuts down on price to increase sales and
thus increases profit may actually go in loss if in reality other companies were to cut down their prices as
well.
Game theory plays on the fact that a company has such competitors who manipulate their strategies on
what they think everyone is doing. The aptitude of the competitor should be thoroughly considered
while formulating a strategy. To understand the competitor thought process, one should put himself in
the competitor’s shoes while formulating the strategy and then think what move the competitor will
make. But the problem is caused when companies make the same changes as the competitors and
therefore results in no progress at all. Here the game theory helps the organizations to identify these
problems.
Game theory can also be used to determine broad environment of strategic interactions that include
sports, politics and oligopolies. Most of the strategic failures are caused by the lack of consideration of
the competitors’ responses. Game theory stresses upon a single point that an organization should
always consider all the options of competitor’s response and then make a strategy that should counter
all of the rival’s response.
Elements of the Game:
 Players, who are the decision makers in the game.
 Actions, which are the options available to the player.
 Information is the knowledge that a player holds onto when he makes a decision.
 Strategies are the set of rules that guides the player to take actions at the right time.
 Outcomes are the results which unfold later.
 Payoffs are the pleasantries that players are dependent for the outcome
 Equilibrium is the stable and stagnant state.
The Framework of Game Theory:
 Define problem statement.
 Explain the critical factors.
 Form a model.
 Make a hypothesis using the model.
 Finally make a strategy

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A good strategy helps the employees to work on guidelines without knowing the problem. It clearly
states the actions that need to be taken under specified conditions.
http://www.researchomatic.com/Game-Theory-53238.html