What is Game Theory

Summary

Game theory can be used in every part of our lives, but an opportunity to gain more than others comes with a reaction that some can’t square. Recognise opportunity, understand your opponent, and be prepared for the reaction.

What is Game Theory?

We don’t always realise it, but we use game theory in our lives every day, no matter who we are and what we are doing. We are constantly negotiating and to do this, we must play the game. But just what is the game? There are many different ways we play and many different games. Let’s start by taking a closer look at the game in general.

The opportunity

Suppose you see an opportunity to gain a lot, but you know by doing this others will gainless, or have nothing at all. What do you do? Just because an opportunity is there doesn’t mean you should take it. It’s a dilemma, but sometimes when you see a way to gain something, whether that’s money or an emotional upper hand, the consequences may not be worth it. This very much depends on what type of person is making the decision. For some people the opportunity is everything and the consequences don’t mean much, while for others consequence outweighs gain. In a group situation, if you see a way to manipulate other people and gain something for yourself, you might think is perfectly fine, all’s fair in the game, but the aftermath of this will be too much for some to deal with. You won’t make many friends by gaining when everyone else loses. The trick is to make other people think that emerging from the game with something is better than nothing, even if you still take the lion’s share. The game can be brutal and some people want to win more than others.

The Reaction

Are you prepared for the reaction to your decision? Just as the decision you make depends on the type of person you are, so too does the reaction you get depends on who the people are on the other end of your decision. Some people are no good at playing the game and will happily lose. Some will think they had no choice in the matter and gaining a little is better than nothing. And some people will be outraged that you had the audacity to take more than them. Reading and understanding your opponent in the game is everything. You might still get it wrong. You might not care. And for some people having the confidence to take everything right under the noses of everyone else, is enough to make it work out just fine, like magic. This is seen again and again in politics. World leaders perform this trick regularly, with each other in negotiations and also with their citizens. We perform this also in our daily lives, with our partners at home and with our colleagues at work. We might not see this as playing a game, but it is. Every decision you make has a reaction. Some people will walk away with nothing rather than play the game. But game theory is a part of life and it can be used, to great effect, in every part of our lives.

Are you ready to play?