Game theory in project management - Revision history

Tkokotas at 15:19, 18 December 2018

2018-12-18T15:19:20Z

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	~~[[Category:Game theory]] [[Category:Decision Making‏‎]] [[Category:Mathematical model]] [[Category:Complexity]] [[Category:Strategic Management]]~~		''Developed by Damien Le Corre''


	'''Introduction'''		'''Introduction'''

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	==Text references==		==Text references==
	<references/>		<references/>
			[[Category:Game theory]] [[Category:Decision Making‏‎]] [[Category:Mathematical model]] [[Category:Complexity]] [[Category:Strategic Management]]

Tkokotas at 17:19, 23 October 2018

2018-10-23T17:19:30Z

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	[[Category:Game theory]] [[Category:Decision Making‏‎]] [[Category:~~Mathematics~~]] [[Category:Complexity]] [[Category:Strategic Management]]		[[Category:Game theory]] [[Category:Decision Making‏‎]] [[Category:Mathematical model]] [[Category:Complexity]] [[Category:Strategic Management]]
	'''Introduction'''		'''Introduction'''

Tkokotas at 16:51, 23 October 2018

2018-10-23T16:51:16Z

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	[[Category:Game theory]] [[Category:Decision Making‏‎]] [[Category:Mathematics]] [[Category:Complexity~~]] [[Category:Decision theory~~]] [[Category:Strategic Management]]		[[Category:Game theory]] [[Category:Decision Making‏‎]] [[Category:Mathematics]] [[Category:Complexity]] [[Category:Strategic Management]]
	'''Introduction'''		'''Introduction'''

Tkokotas at 16:50, 23 October 2018

2018-10-23T16:50:13Z

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	[[Category:Game theory]] [[Category:Decision ~~making~~]] [[Category:Mathematics]] [[Category:Complexity]] [[Category:Decision theory]] [[Category:Strategic Management]]		[[Category:Game theory]] [[Category:Decision Making‏‎]] [[Category:Mathematics]] [[Category:Complexity]] [[Category:Decision theory]] [[Category:Strategic Management]]
	'''Introduction'''		'''Introduction'''

Damien: /* Websites */

2015-09-27T14:56:11Z

Websites

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	Ben Polak :[https://www.youtube.com/view_play_list?p=6EF60E1027E1A10B Yale courses on Game Theory].		Ben Polak :[https://www.youtube.com/view_play_list?p=6EF60E1027E1A10B Yale courses on Game Theory].
	These videos have been released according to Yale's program of knowledge's accessibility. It consists in real courses filmed at Yale University. Therefore, the first lessons are accessible to anyone and provide a great background and explanation if Game Theory. It is also a great way to approach step by step the mathematical view of Game Theory. However some prerequisites in mathematics are expected in order to fully profit from the courses.		These videos have been released according to Yale's program of knowledge's accessibility. It consists in real courses filmed at Yale University. Therefore, the first lessons are accessible to anyone and provide a great background and explanation of Game Theory. It is also a great way to approach step by step the mathematical view of Game Theory. However some prerequisites in mathematics are expected in order to fully profit from the courses.

	Thomas S.Ferguson : [http://www.math.ucla.edu/~tom/Game_Theory/Contents.html Mathematical approach of Game Theory].		Thomas S.Ferguson : [http://www.math.ucla.edu/~tom/Game_Theory/Contents.html Mathematical approach of Game Theory].
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	This article published by the Stanford encyclopedia of Philosophy offers a great presentation of Game Theory as well as general reflexions on the subject. Therefore it can be a great way to discover the Theory.		This article published by the Stanford encyclopedia of Philosophy offers a great presentation of Game Theory as well as general reflexions on the subject. Therefore it can be a great way to discover the Theory.
	It also provides technical information while keeping low the mathematical aspect which is ideal if the lectors does not possess a strong mathematical background.		It also provides technical information while keeping low the mathematical aspect which is ideal if the lectors does not possess a strong mathematical background.


	==Printed references==		==Printed references==

Damien: /* Conclusion */

2015-09-27T14:54:40Z

Conclusion

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	= Conclusion =		= Conclusion =

	Despite its inherent defaults, Game theory ~~isn’t~~ closed regarding the possible outcomes. If profit is often chosen as the target outcome, the stability of the solution can also be considered. Applied to huge entities, '''Game Theory''' becomes even more effective as we get generally closer to the rational and egoistic behaviour. Moreover, the construction of the model highlights all the possible outcomes regarding the different strategies. From this range of possibilities, the manager can then choose the most adequate solution based on a human knowledge of the situation, for example the necessity to be fair towards the “opponent”, who may be the client or ~~an other~~ company, even if it means reducing the payoff.		Despite its inherent defaults, Game theory is not closed regarding the possible outcomes. If profit is often chosen as the target outcome, the stability of the solution can also be considered. Applied to huge entities, '''Game Theory''' becomes even more effective as we get generally closer to the rational and egoistic behaviour. Moreover, the construction of the model highlights all the possible outcomes regarding the different strategies. From this range of possibilities, the manager can then choose the most adequate solution based on a human knowledge of the situation, for example the necessity to be fair towards the “opponent”, who may be the client or another company, even if it means reducing the payoff on the short term.

	It is, at least, very important to be aware of such a way of modelling. Strategies out of '''Game Theory''' are in certain cases incredibly effective, surely because they do not take the human factor into account. This aspect is both the strength and the weakness of the concept, as every tools, it all depends on how to use it. The manager has to master the utilisation he is making out of it.		It is, at least, very important to be aware of such a way of modelling. Strategies out of '''Game Theory''' are in certain cases incredibly effective, surely because they do not take the human factor into account. This aspect is both the strength and the weakness of the concept, as every tools, it all depends on how to use it. The manager has to master the utilisation he is making out of it.

Damien: /* Never ending games: Game theory with no answers */

2015-09-27T14:52:23Z

Never ending games: Game theory with no answers

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	[[File: Cake sharing.jpeg\|500px\|thumb\|center\|Figure 5: Cake sharing]]		[[File: Cake sharing.jpeg\|500px\|thumb\|center\|Figure 5: Cake sharing]]

	We rapidly see a cycle appears, all the strategies are dominated by others. The game will never end regarding game theory, because one player can always make a proposal which will ~~suits~~ better to two players.		We rapidly see a cycle appears, all the strategies are dominated by others. The game will never end regarding game theory, because one player can always make a proposal which will suit better to two players.
	It appears here that Game theory cannot answer all types of situation. Only negotiations skills can allow one player to end the game.		It appears here that Game theory cannot answer all types of situation. Only negotiations skills can allow one player to end the game.

Damien: /* Market entry game */

2015-09-27T14:48:47Z

Market entry game

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	It is now clear that if P1 has the opportunity to make the first move, he will surely enter the market i.e. chose 1. Then P2 has no choice but to not enter the market in order to reduce its loss. P1 ends up with the best outcome possible; a benefit of 10.		It is now clear that if P1 has the opportunity to make the first move, he will surely enter the market i.e. chose 1. Then P2 has no choice but to not enter the market in order to reduce its loss. P1 ends up with the best outcome possible; a benefit of 10.
	Recognizing a FMA ~~in a situation is~~ very important, some complex situations (during projects regarding negotiations or when some important choices have to be made)can make people too cautious or even passive. Waiting for someone else to unlock the situation, make the first move, can already be a failure.		Recognizing a potential FMA can be very important, some complex situations (during projects regarding negotiations or when some important choices have to be made)can make people too cautious or even passive. Waiting for someone else to unlock the situation, make the first move, can already be a failure.

	== Coalition game ==		== Coalition game ==

Damien: /* Market entry game */

2015-09-27T14:46:41Z

Market entry game

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	This is a simultaneous competitive game. We can model ~~him~~ through a table similar to the prisoner’s dilemma:		This is a simultaneous competitive game. We can model it through a table similar to the prisoner’s dilemma:

	[[File: Marketentry.jpeg\|500px\|thumb\|center\|Figure 3: Market entry]]		[[File: Marketentry.jpeg\|500px\|thumb\|center\|Figure 3: Market entry]]
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	Notations:		Notations:
	* 1: enter the market		* 1: enter the market
	* 2: ~~doesn't~~ enter the market		* 2: does not enter the market

	In the figure the same game is represented as sequential, meaning one player chooses its strategy first and the others have to reply afterwards.		In the figure the same game is represented as sequential, meaning one player chooses its strategy first and the others have to reply afterwards.

Damien: /* Agreement game */

2015-09-27T14:40:53Z

Agreement game

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	From a managerial point of view, '''Game theory''' is a very good tool to get into other people shoes and try to fully understand their point of view and their options. With a game theory vocabulary, the main goal is to fully understand all the strategies available for all the players. Then the model can help to choose the best strategy in order to maximise one’s own profit, or a coalition profit, or just chose the best reply in order to defeat the opponent in zero-sum game.		From a managerial point of view, '''Game theory''' is a very good tool to get into other people shoes and try to fully understand their point of view and their options. With a game theory vocabulary, the main goal is to fully understand all the strategies available for all the players. Then the model can help to choose the best strategy in order to maximise one’s own profit, or a coalition profit, or just chose the best reply in order to defeat the opponent in zero-sum game.

	However some situations can be directly treated ~~trough~~ game theory. The following presents some simples examples where game theory can model a management issue and bring a satisfying solution.		However some situations can be directly treated through game theory. The following presents some simples examples where game theory can model a management issue and bring a satisfying solution.

	For example an agreement between 2 companies can be modelled considering a precise market:		For example, an agreement between 2 companies can be modelled considering a precise market:

	Company 1, C1, and company 2, C2, agreed to share a market and release a certain amount of a product P in order to keep the price high. If C1 and C2 keep the agreement they sell P at 50. If one breaks the agreement, we will assume that he will be able to win on the long term the entire market and therefore sell the product to a higher price: 70. If they both break the agreement and try to increase their sells, there will be an overproduction of P, the market will saturate and the price will decrease: 30. This game can be represented through a table:		Company 1, C1, and company 2, C2, agreed to share a market and release a certain amount of a product P in order to keep the price high. If C1 and C2 keep the agreement they sell P at 50. If one breaks the agreement, we will assume that he will be able to win on the long term the entire market and therefore sell the product to a higher price: 70. If they both break the agreement and try to increase their sells, there will be an overproduction of P, the market will saturate and the price will decrease: 30. This game can be represented through a table: