---
title: "Game theory"
chunk: 7/13
source: "https://en.wikipedia.org/wiki/Game_theory"
category: "reference"
tags: "science, encyclopedia"
date_saved: "2026-05-05T03:56:32.715747+00:00"
instance: "kb-cron"
---

==== Managerial economics ====
Game theory also has an extensive use in a specific branch or stream of economics – Managerial Economics. One important usage of it in the field of managerial economics is in analyzing strategic interactions between firms. For example, firms may be competing in a market with limited resources, and game theory can help managers understand how their decisions impact their competitors and the overall market outcomes. Game theory can also be used to analyze cooperation between firms, such as in forming strategic alliances or joint ventures. Another use of game theory in managerial economics is in analyzing pricing strategies. For example, firms may use game theory to determine the optimal pricing strategy based on how they expect their competitors to respond to their pricing decisions. Overall, game theory serves as a useful tool for analyzing strategic interactions and decision making in the context of managerial economics.

=== Business ===
The Chartered Institute of Procurement & Supply (CIPS) promotes knowledge and use of game theory within the context of business procurement. CIPS and TWS Partners have conducted a series of surveys designed to explore the understanding, awareness and application of game theory among procurement professionals. Some of the main findings in their third annual survey (2019) include:

application of game theory to procurement activity has increased – at the time it was at 19% across all survey respondents
65% of participants predict that use of game theory applications will grow
70% of respondents say that they have "only a basic or a below basic understanding" of game theory
20% of participants had undertaken on-the-job training in game theory
50% of respondents said that new or improved software solutions were desirable
90% of respondents said that they do not have the software they need for their work.

=== Project management ===
Sensible decision-making is critical for the success of projects.  In project management, game theory is used to model the decision-making process of players, such as investors, project managers, contractors, sub-contractors, governments and customers.  Quite often, these players have competing interests, and sometimes their interests are directly detrimental to other players, making project management scenarios well-suited to be modeled by game theory.
Piraveenan (2019) in his review provides several examples where game theory is used to model project management scenarios. For instance, an investor typically has several investment options, and each option will likely result in a different project, and thus one of the investment options has to be chosen before the project charter can be produced. Similarly, any large project involving subcontractors, for instance, a construction project, has a complex interplay between the main contractor (the project manager) and subcontractors, or among the subcontractors themselves, which typically has several decision points. For example, if there is an ambiguity in the contract between the contractor and subcontractor, each must decide how hard to push their case without jeopardizing the whole project, and thus their own stake in it. Similarly, when projects from competing organizations are launched, the marketing personnel have to decide what is the best timing and strategy to market the project, or its resultant product or service, so that it can gain maximum traction in the face of competition. In each of these scenarios, the required decisions depend on the decisions of other players who, in some way, have competing interests to the interests of the decision-maker, and thus can ideally be modeled using game theory.
Piraveenan summarizes that two-player games are predominantly used to model project management scenarios, and based on the identity of these players, five distinct types of games are used in project management.

Government-sector–private-sector games (games that model public–private partnerships)
Contractor–contractor games
Contractor–subcontractor games
Subcontractor–subcontractor games
Games involving other players
In terms of types of games, both cooperative as well as non-cooperative, normal-form as well as extensive-form, and zero-sum as well as non-zero-sum are used to model various project management scenarios.

=== Political science ===