Have you Applied Game Theory Today?
A couple of months ago, we witnessed collaboration of rival telecommunication giants, Reliance Jio and Bharti Airtel and Vodafone against the Telecom Regulatory Authority of India. This was in a bid to demand lower 5G spectrum prices.
Few months ago Reliance rivals had accused the telecommunication company of slashing prices which caused disruption in the market. On its side Reliance had accused its rivals of charging high interconnection usage charges.
Meanwhile the Competition Commission of India had in a recent case penalized airlines such as Spicejet and Indigo for colluding to control air ticket prices. This is a clear indication of what happens in the business world.
Players always face dilemmas that can either cause competition or collaboration. Such instances might at times turn out ruthless and unethical, and this is what the authority calls games.
An ideal way to explain these games is through game theory. Game theory is the study of how people or businesses employ tactics in case of competition. It highlights the outcomes of an individual actions which are not only determined by his decisions but also of competitors.
It is more relevant in oligopoly markets where few firms make decisions and control the entire industry. As such, each player has to factor in what his or her decisions will affect competitors and how they will react.
For example if Indigo decides to slash air tickets, it expects to make profits and attract more clients. However, the final outcome will depend on the decisions of the other airlines such as Spice Jet. Not only is game theory rampant in business but also in our daily life.
Source: https://www.deccanherald.com/opinion/in-perspective/have-you-applied-game-theory-781103.html
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