[ucaetano]

Most corporate strategy/competitive strategy problems use game theory on a daily basis. Market entry, retaliation, oligopoly, monopoly, etc. are good examples.

Game theory-heavy industries are the ones in a competitive balance. Think Coke/Pepsi, telecom, etc.

Another way game theory helps is in building the right mindset: you assume that your opponent is just as rational and smart as you, and will be trying to predict how you will react just as you're doing with him/her.

This helps to avoid the failures that result from underestimating your competitors ("we're smarter than them" or "we're better than them").

Disclaimer: I work in strategy.

[mud_dauber]

Any chance of elaborating? I'm curious if GT is a 'real tool' (compared to, for example, SWOT analysis), or a high-level mindset?

[ocaml_mycaml]

The standard in antitrust law when evaluating a merger or acquisition is to write down a game theoretic model of competition, estimate the parameters of the model (consumers' tastes, degree of substitutability between products, etc.), and make projections of prices based on those parameters.

[mud_dauber]

Interesting. Thanks and a fistbump for the username. :-)

[ucaetano]

More of a high-level mindset, since GT is more of an academic topic.

A lot of the effects described in GT can be learned by practice and observation of human competitive behavior, but studying it gives you a much better understanding of why certain situations happen, or how competitors will react.

The market entry game (retaliate/accommodate) is usually the best example:

https://books.google.com/books?id=xhAACwAAQBAJ&pg=PA77&lpg=P...

Another example is signaling: when you publicly declare that you will match prices aggressively and will never be undercut, that's not actually a threat to your competitors, but a signal that if they keep prices high, you will as well, avoiding a price war.

[wenc]

It sounds like in your examples, ideas and conclusions from GT were used to inform practice (sort of like mental models), but GT models themselves were not explicitly deployed.

Game Theory is first and foremost a quantitative, mathematical theory, and I was wondering in what situations one would actually use the mathematics in production systems or in a mathematical analysis. There are a few replies on this thread that alluded to some applications.

[ucaetano]

> in what situations one would actually use the mathematics in production systems or in a mathematical analysis. There are a few replies on this thread that alluded to some applications.

I never worked directly with this, but auctions, resource allocation, etc. all use the mathematical tools from Game Theory.

Corporate strategy is too complex and nuanced to build hard mathematical models, so you need higher-level abstractions.

[mud_dauber]

The signaling example is quite interesting. Thank you