Decision - Making Process in Business Using Game Theory

Abstract

These days, the business environment is dynamic, volatile, uncertain, and with multiple self-interested agents interacting, leading to various opportunities for both conflict and cooperation to appear. Gaining and sustaining competitive advantage on market became important capabilities of a company. The aim of this paper is to investigate the efficiency of game theory in the decision-making process of companies from automotive industry. Game theory is a topic of modern applied mathematics. It uses mathematical techniques for analyzing situations when managers/competitors in the same segment make decisions that influence one another’s interests/business. A key element in a game is to discover which strategy is a decision maker’s best response to the strategies chosen by the others. The concepts of game theory involve the need to formulate, analyze and understand strategic scenarios of companies from various fields. The study’s methodology is based on literature review, case studies, and mathematical methods. After a suggestive literature review framework, the study presents applications which use different types of games in various conditions. The findings prove that game theory represents an important tool for decision-makers from the automotive industry in the field of strategic planning. The results are useful both in the market, for decision-makers and managers of companies, as well as in the academic field, for students. Game theory is inspiring because the terms and ideology are simpler than those of other theories in this segment. Game theory uses mathematical models to look at how conflict and cooperation work together.