In 1949 Nash published his first scientific work, one of the great classics of modern economics. It was about the problem of negotiation . In it he posed the problem precisely for the first time and demonstrated that there are unique solutions. Although he wrote it at Princeton, the idea occurred to him while he was taking the only economics class he ever took, a semester on international agreements when he was a student at the Carnegie Institute of Technology.

Examples of Game Theory in Real Life.

Game theory is a new science, but it is already being studied in the best universities in the world. The publishing house “MYTH” published the textbook “Strategic Games”. It will be useful if you want to learn how to analyze your every action, make informed decisions, and better understand not only others, but also yourself.

1. Game Theory on Dating Game.

Take dating, for example. We all choose one main strategy: we try to hide negative character traits and show positive ones. For now, I won’t tell you that every evening I like to lie down with a beer on the couch. I’ll tell you when she gets to know me better and understands that I’m otherwise okay.

This strategy is, rather, not a lie, but a silence.

Example

Imagine the situation: a man and a woman have been dating for several months and one day they decide to move in together . The man has a small apartment, so it is logical that we are talking about moving into a woman’s apartment.

It must be said that the man works as an economist. He analyzed the situation and realized that it was not yet profitable to refuse to rent an apartment. Now he pays little money and if the relationship breaks down, he will not find an equally good option. The woman, having learned about this, immediately leaves the gentleman.

What did this couple do wrong? The man, having correctly calculated the situation from an economic point of view, did not take into account the psychological factor. The woman perceived the gesture with the apartment as frivolity of intentions. But she didn’t think about the fact that her boyfriend, an economist, therefore makes decisions primarily from the position of “profitable or unprofitable.” Thus, this game was lost by both participants.

What to do

Calculate not only your actions, but also the reactions of other people. Ask yourself often: how can you interpret my action? Advice especially for men: explain your actions and remember that any misunderstanding is a reason for your other half to fantasize. Strategic thinking is not only mathematics, but also psychology!

2. Game for 90 points

Riddles, quests, intelligence and logic tests will no longer be a problem after studying game theory. You will learn to search for all existing answer options and choose the most suitable one among them.

Example

Two students asked the professor to postpone the exam. They told a heartbreaking story about how they went to another city for the weekend, but on the way back they got a flat tire. They had to look for help all night, so they didn’t get enough sleep and didn’t feel well. (In fact, friends were celebrating the end of the session, and this exam was the final one and not the hardest.)

The professor agreed. The next day, he seated the students in different classrooms and handed out a piece of paper with only two questions. The first cost only 10 points, and the second cost 90 and sounded like this: “Which tire is flat?”

If you rely on logic, then the answer will be “Right front wheel”: it is on the right, closer to the side of the road, that most often there is any debris lying around, which is the first to be hit by the front tire. But don’t rush.

In this situation, it is important to give not so much the correct (logical) answer, but the answer that will be written on a friend’s piece of paper.

Therefore, it is obvious that both students will make guesses based on the assumption that the other thinks.

We can think like this: do students have something “in common” with one of the wheels? Perhaps a year ago they already had to change a tire together. Or one tire is smeared with paint, and both students know about it. If such a moment is found, this is the option worth choosing. Even if another student is not familiar with game theory, he can remember this incident and point to the correct wheel.

What to do

In your reasoning, rely not only on logic, but also on life circumstances. Remember: not everything that is logical for you is also logical for someone else. Involve friends and family in thinking games more often. This will allow you to understand how people close to you think, and in the future avoid difficult situations, as in the example above.

3.Auction game

There are different types of auctions. For example, in the film “The Twelve Chairs” there was a so-called English auction. His scheme is simple: the one who offers the highest amount for the exhibited lot wins. Usually a minimum step is set to raise the price, otherwise there are no restrictions.

Example

In the auction episode from “The Twelve Chairs,” Ostap Bender made a strategic mistake. Following an offer of 145 rubles per lot, he immediately raised the price to two hundred.

From the point of view of game theory, Ostap should have raised the bet, but only minimally until there were no competitors left. This way, he could save money and not get into trouble: Ostap was 30 rubles short of paying the commission fee.

What to do

There are games, such as auction, that you only need to play with your head. Decide on your tactics in advance and think about the maximum amount you are willing to pay for the item. Commit to yourself not to exceed the limit. This step will help you cope with excitement if it suddenly overtakes you.

4. Playing on an impersonal market

The impersonal market includes banks, insurance companies, contractors, and consulates. In general, those participants in the game who do not have first and last names. They are impersonal, but it is a mistake to believe that the rules of game theory do not apply to them.

Example

Maxim turns to the bank in the hope of getting a loan. His credit history is not perfect: two years ago he refused to repay another loan for six months. The employee who accepts the documents says that, most likely, Maxim will not receive a loan.

Then Maxim asks permission to deliver the documents. He brings an extract from the hospital confirming that his father was seriously ill during those six months. Maxim writes a statement indicating the reasons for the delay in repaying the previous loan (the money was needed for his father’s treatment). And after some time he receives a new loan.

What to do

When you deal with impersonal players, always remember that there are personalities behind them. Figure out how to draw your opponents into the game and set your own rules.

How is Game Theory Used in Real Life; Examples of Game Theory in Real.

1. Business Negotiations: In business, game theory can help analyze competitive interactions, such as pricing strategies, product launches, and mergers. By understanding the motivations and potential actions of competitors, companies can make more informed decisions to maximize their profits.
2. Political Campaigns: Game theory is often used to strategize political campaigns, as candidates must consider the responses of voters, rivals, and interest groups. By anticipating the moves of others and adjusting their own strategies accordingly, politicians can improve their chances of winning elections.
3. Sports Strategy: In sports, coaches and players often use game theory to plan their tactics and respond to the actions of their opponents. For example, in a game of chess, players must anticipate their opponent’s moves and adjust their strategy accordingly to gain a competitive advantage.
4. International Relations: Game theory plays a crucial role in international relations, where countries must navigate complex diplomatic negotiations and conflicts. By understanding the incentives and constraints faced by other nations, policymakers can make strategic decisions to promote peace and cooperation.
5. Prisoner’s Dilemma: Imagine two criminals are arrested and held in separate cells, with no means of communication. If both remain silent, they will each serve a short sentence. However, if one confesses and implicates the other, they will go free while the other serves a longer sentence. In this scenario, the best outcome for both is to remain silent, but individual incentives may lead to betrayal.
6. Chicken Game: In the chicken game, two drivers race toward each other on a collision course. The first to swerve is seen as a coward, but if neither swerves, they will both crash. This scenario illustrates the tension between individual risk-taking and collective safety, as both players must decide whether to prioritize their pride or their safety.
7. Battle of the Sexes: In the battle of the sexes game, a couple must decide whether to go to a romantic movie or a sporting event. While they both prefer to be together, they have different preferences for the activity. This scenario highlights the importance of communication and coordination in reaching a mutually beneficial outcome.
8. Crime and Punishment: Criminals and law enforcement agencies strategize their actions. For example, police might increase patrols in certain areas expecting criminal activities to shift.
9. Advertising: Companies decide on advertising budgets based on competitors’ spending, aiming to maximize market share and profit.
10. Environmental Agreements: Countries negotiate climate agreements considering the benefits of cooperation against the temptation to defect and free-ride on others’ efforts.
11. Oligopolies: Firms in an oligopoly decide production levels considering competitors’ production to maximize their own profits without triggering a price war.
12. Dating and Relationships: Individuals strategize their behavior and choices based on how they expect potential partners to react, aiming for the best possible match.
13. Military Strategies: Nations use game theory in defense planning, considering potential enemy strategies to optimize their own military actions.
14. Insurance Markets: Insurers and policyholders use game theory to strategize about premium levels and coverage, balancing risks and costs.
15. Labor Strikes: Unions and employers strategize during labor disputes, considering the costs and benefits of strikes or lockouts.
16. Internet Security: Companies and hackers strategize their actions in cybersecurity, balancing the costs of defenses and potential breaches.
17. Market Entry: New companies decide whether to enter a market based on expected reactions from existing competitors, such as price cuts or increased marketing.
18. Stock Market: Investors use game theory to predict stock price movements based on others’ buying and selling behaviors, aiming to maximize returns.
19. Education Choices: Students decide on courses and degrees considering job market expectations and competitors’ qualifications.
20. Telecommunications: Companies strategize on spectrum bidding and network investments based on competitors’ actions to maximize coverage and profit

In conclusion, game theory offers valuable insights into decision-making processes and strategic interactions in various real-life situations. By applying the principles of game theory, individuals and organizations can make more informed choices and achieve better outcomes in competitive environments.