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Operations Management - Game Theory, Goal Programming & Queuing Theory

Introduction To Game Theory - Basic Concepts In Game Theory

   Posted On :  24.06.2018 01:30 am

Game theory seeks to analyse competing situations which arise out of conflicts of interest.

Introduction To Game Theory
 
Game theory seeks to analyse competing situations which arise out of conflicts of interest. Abraham Maslow’s hierarchical model of human needs lays emphasis on fulfilling the basic needs such as food, water, clothes, shelter, air, safety and security. There is conflict of interest between animals and plants in the consumption of natural resources. Animals compete among themselves for securing food. Man competes with animals to earn his food. A man also competes with another man. In the past, nations waged wars to expand the territory of their rule. In the present day world, business organizations compete with each other in getting the market share. The conflicts of interests of human beings are not confined to the basic needs alone. Again considering Abraham Maslow’s model of human needs, one can realize that conflicts also arise due to the higher levels of human needs such as love, affection, affiliation, recognition, status, dominance, power, esteem, ego, self-respect, etc. Sometimes one witnesses clashes of ideas of intellectuals also. Every intelligent and rational participant in a conflict wants to be a winner but not all participants can be the winners at a time. The situations of conflict gave birth to Darwin’s theory of the ‘survival of the fittest’. Nowadays the concepts of conciliation, co-existence, co-operation, coalition and consensus are gaining ground. Game theory is another tool to examine situations of conflict so as to identify the courses of action to be followed and to take appropriate decisions in the long run. Thus this theory assumes importance from managerial perspectives. The pioneering work on the theory of games was done by von Neumann and Morgenstern through their publication entitled ‘The Theory of Games and Economic Behaviour’ and subsequently the subject was developed by several experts. This theory can offer valuable guidelines to a manager in ‘strategic management’ which can be used in the decision making process for merger, take-over, joint venture, etc. The results obtained by the application of this theory can serve as an early warning to the top level management in meeting the threats from the competing business organizations and for the conversion of the internal weaknesses and external threats into opportunities and strengths, thereby achieving the goal of maximization of profits. While this theory does not describe any procedure to play a game, it will enable a participant to select the appropriate strategies to be followed in the pursuit of his goals. The situation of failure in a game would activate a participant in the analysis of the relevance of the existing strategies and lead him to identify better, novel strategies for the future occasions. 
Tags : Operations Management - Game Theory, Goal Programming & Queuing Theory
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