game theory

(noun)

A branch of applied mathematics that studies strategic situations in which individuals or organizations choose various actions in an attempt to maximize their returns.

Related Terms

Examples of game theory in the following topics:

  • Marginal Analysis

    • In a non-competitive environment, more complicated profit maximization solutions involve the use of game theory.

  • Predatory Pricing

    • After chasing competitors out of the market, the incumbent would have fewer competitors (and may in fact be a monopoly), and can then - in theory - raise prices above what the market would otherwise bear.
    • Economists argue that the competitors (the 'prey') know that the predator cannot sustain low prices forever, so it is essentially a game of chicken.
    • Prey may not see it as a game of chicken, if they truly believe that the prey has actually found a way to achieve a lower cost of production than them.
    • However, this does not support the idea that the new virtual monopoly could raise and sustain prices at monopoly levels, even though there are certain barriers to entering monopolized markets that could, in theory, prevent the entry of competition.

  • Mobile Marketing

    • Game mobile marketing provides additional opportunities for brands looking to deliver promotional messaging within mobile games.
    • Some companies sponsor entire games to drive consumer engagement, a practice known as mobile advergaming or ad-funded mobile gaming.

  • The Diffusion of Innovation

    • The diffusion of innovation theory seeks to explain how, why, and at what rate new ideas and technology spread through cultures.
    • The diffusion of innovation is a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures.
    • The origins of the diffusion of innovation theory are varied and span multiple disciplines.
    • Everett Rogers, a professor of rural sociology, popularized the theory in his 1962 book Diffusion of Innovations.
    • Rogers (1962) espoused the theory that there are four main elements that influence the spread of a new idea:

  • The Product Life Cycle

    • For example, consider the product development and life cycle of a video game.
    • Often the games take 2 to 4 years to develop.

  • Monitoring Competition

    • Visualize marketing strategy as a huge chess game where one player is constantly making his or her moves contingent on what the other player does.
    • Some U.S. rivals, like Coke and Pepsi, McDonald's and Burger King, and Ford and General Motors, have been playing the game so long that a stalemate is often the result.

  • Targeting Consumers Where They Spend Time

    • Personal information ranging from birthdays and profession, to family photos and multi-user gaming yield insightful intelligence for marketers looking to improve promotion to niche and hard-to-reach markets.
    • Busy and hectic schedules are prompting people to view and access brand messaging on the go from their Smartphones, tablets and gaming consoles.

  • Understanding Apps in a Marketing Context

    • However, public demand and the availability of developer tools drove rapid expansion into other categories, such as mobile games, factory automation, GPS and location-based services, banking, order-tracking, and ticket purchases.
    • Viral marketing may take the form of video clips, interactive Flash games, ebooks, brandable software, images, text messages, email messages, or web pages.

  • Target Market Characteristics

    • For example, accessories for people who own cell phones, tablets, computers, iphones, or gaming systems.

  • The Demand Curve

    • For example, weather could effect the demand for beer at a baseball game.
    • For example, weather could effect the demand for beer at a baseball game.