#Microeconomics, #GameTheory & #Finance
The Game Theory is one of the most important, yet seldom taught, fields of study. It lies at an intersection of mathematics, micro-economics, strategy & psychology. The applications are very diverse — from biological evolution to politics, to business strategy, to financial trading algorithms, to behavioural science, to war, to Artificial intelligence to philosophy, to cryptocurrencies and to relationships, just to name a few. But why is this concept so important and applicable to so many diverse fields?
That is because game theory deals with situations or ‘games’ where the outcome of any individual’s actions is dependent on the actions of the other participants. In simple terms, what you get (or win) not only depends on what you do, but also what others do. Game theory is so prevalent because such situations exist almost everywhere you look. They exist in nature between the predator and the prey. They exist between competing companies, with each trying to outwit the other. They exist in strategic decision making where organisations or individuals have to predict what is the best path forward.
Game theory in essence tries to create mathematical models to analyse such situations — Situations where there are more than one rational decision maker, and each of them want to maximise their rewards, and each of their rewards depends on the decisions of others.
