Since in 1994, John Nash, John Harsanyi, and Reinhard Selten were awarded the Nobel Prize in Economics (Crainer, 1996), business people had started to apply the game theory in the business strategy. Some people argued that game theory is well established theory, but it is too hard to use in developing and implementing international business strategy. In the author's opinion, even though game theory has some demerits to apply in the international business strategy, it is still contributed to the international business strategy. This paper will introduce the game theory briefly, describe some disadvantages of game theory to apply in the international business strategy, and then discuss why game theory can develop and implement international business strategy to support author's argument.
"In simple terms, it is a set of complex mathematical formulae that shows how decisions affect each other, by offering a comprehensive explanation of how interdependent individuals, corporations, and governments make strategic choices" (Murdoch, 1999).
In the business discipline, game theory deals with how to cooperate and compete with customers, suppliers, complementors and substitutors with profound consideration.
Why game theory is hard to use in international business strategy?
Game theory is based on some hypotheses but in reality, maybe, the conditions of games don't match the hypotheses. For instances, game theory assumes all players are rational and believe others are rational (De Wit and Meyer, 1998). It is almost impossible in every occasion of business game. Additionally, as the number of players increases, the model of game theory becomes more complicated. According to (Crainer, 1996), game theory is most effective in the scenarios where there are only limited players and players behave in rational ways. This can explain why members of Cartel show excessively interest to use game theory. Besides, in game theory, the models, depending...