When applying game theory strategies in real life situations, businesses tend to forget that the real world is much more complicated in comparison to perfect environment provided by game theory strategies. Businesses using the prisoner’s dilemma strategy, for example, need to take this into account when they’re faced with real-life business problems. When using this approach, they should ensure their strategy is simple enough to make decisions, but complicated enough to provide obstacles that make the outcome as realistic as possible. It is also important for businesses to not just focus solely on a single proposed solution to a situation, but have a set of strategic options to account for any problems and/or changes that were unforeseen with the initial solution. Each strategic option should be presented with their respective advantages and disadvantages when implementing them, to allow the “players” to adjust their actions and find the optimal solution after considering all the factors on hand. Traditionally, game theory delivers the best solution by strategically predicting the most probable outcome, however it doesn’t always account for the uncertainties that exist in the real world. When applying game theory in real life scenarios, you should have more than one proposed solution and for each you should have all potential assumptions and actions that could hypothetically change the outcome, all so it more accurately represents the dynamic and unpredictable world we live in. (1)
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References:
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- Making Game Theory Work For Managers – An article from Mckinsey and Company, giving an in-depth look at their application of the Game Theory.
​- http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/making-game-theory-work-for-managers