Game Theory in Action

Game theory is needed to study economics. It is because some of social and economic issues could be described by the framework of game theory. In a market economy in which we trade, we can't do without competing with each other and thinking strategically to succeed. Game theory,which once had been a branch of pure mathematics since Von Neumann started to study, now seems to be a kind of social science and is sometimes discussed even without math.

Today I attended the lecture on game theory for the general public. Although this lecture was for beginners or elementary students, it was more hard to understand than had I thought. I wondered if every audience could understand what and how game theory describes our society and is applied to the real world. Some audience must have wondered how useful game theory would be in the real life. Also I did.

I once read an article on the use of game theory in the Harvard Business Review written by a consultant of McKinsey & Company. According to it, in the McKinsey & Company, they usually use game theory to build up the strategy for their clients to succeed in business. I doubted how they use game theory to suggest the plan of successful management to their clients.

In reality, to what degree is game theory useful? How can I change the world by knowing the cause and result of "Prisoner's Dilemma"? Certainly there are many scenes of Prisoner's Dilemma in our life: for example, price war between icecream shops, past nuclear competition between the US and the USSR, advertising lavishly new DVD products on TV between Sony and Panasonic and so on.

I like the idea of game theory but doubt the application of game theory for the firms' decision-making in the real world. To work for company, is game theory really useful to us?