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Simple Understanding "Game Theory"

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By Arun Dahal Khatri

Game theory is one of the most scientific and practical theories in economics. In the field of foreign relations, politics, Military strategy it has become most popular. In 1994 three-game theorists jointly got the Nobel prize. Actually, in economics, it is one of the voluntary ideas to bring the change of behavior science.

Now, What is a game theory?
It is the dimension of economics that examines the discretions made by a rival firm, people, and even nations when they are trying to optimize their fortune while envisaging and reacting to the actions of others in the environment. It is began by finding the conflict circumstances. There are decision-makers and creators. Players are involved in the game theory having specific strategies without knowing the rival strategies. Every action has its own cost and effect.

Here I have presented an example, where two rivals need to choose which action should be applied. Team A and B must decide whether to invest in an expensive marketing strategy. If both teams decide not to invest in marketing then they will get equal rewards or earn an equal profit of $100000( But it is not possible because both teams have a dominant strategy )But, if team A chooses to invest in marketing strategy and team B does not then Team A will increase profits and Make $150000 and team B needs to bear the loss of $50000.In another hand, if Team A has chosen to invest and team B also chooses then both will get an equal profit of $30000. If team B has chosen to invest but Team A not then the scenario is Team B got profits of $150000 where Team A needs to bear a loss of $50000.

All the actions of the game theory have their own cost. if a rival makes mistake then the opposition never misses the chance to drop the rival level by selecting and choosing the best option. Most of the actions of the game theory are related to the behavior of the political parties and the behavior of Multai nations companies. In fact, in in-game theory, both teams use the dominant strategy, which is to invest in marketing.

Talking more about  concept of Game theory:

In fact,game theory is a branch of mathematics that studies decision-making in strategic situations where two or more individuals or groups interact with each other. It is used to model and analyze the behavior of rational agents in these situations and to predict the outcomes of their decisions.
A game consists of several elements, including players, strategies, and payoffs. Players are the participants in the game, while strategies are the possible choices they can make. Payoffs are the outcomes or rewards associated with each combination of choices made by the players.
Game theory can be applied to a wide range of fields, including economics, political science, psychology, and biology. It is often used to model and analyze situations such as business negotiations, political campaigns, and military conflicts.

One of the most well-known games in game theory is the Prisoner's Dilemma. In this game, two individuals are arrested for a crime and interrogated separately. They are each given the option to either confess or remain silent. If both individuals remain silent, they both receive a relatively light sentence. If one individual confesses and the other remains silent, the confessing individual receives a reduced sentence, while the other individual receives a heavy sentence. If both individuals confess, they both receive a moderately heavy sentence.