Rules of game theory, Managerial Accounting

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RULES OF GAME THEORY

1) The number of competitors is finite.

2) There is a conflict of interests between the participants.

3) Each of these participants has available to him a finite set of available courses of action i.e. choices.

4) The rules governing these choices are specified and known to all the players. While playing each player chooses a single course of action from the list of choices available to him.

5) The outcome of the game is affected by choices made by all of the players. The choices are to be made simultaneously so that no competitor knows his opponent's choices until he is already committed to his own.

6) The outcome for all specific choices by all the players is known in advance and numerically defined.

7) The players act rationally and intelligently.
When a competitive situation meets all these criteria above, we call it a game.

Note:
Only in a few real competitive situations can game theory be applied because all the rules are difficult to apply at the same time to a given situation.


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