Game Theory Behind Shop Competition

Abstract

This paper covers game theory at a basic level and looks at an elementary application of game theory, the prisoner’s dilemma, in two different ways. The paper goes on to use the example of competitive pizza shops and how game theory can help to make the best business decisions when it comes to whether to advertise or not and how to price slices of pizza. This is an interesting topic that is quite new in the mathematical world. Since John von Neumann and Oskar Morgenstern invented the idea in 1944, there has been a lot of progression in this field with lots of applications. With John Nash being one of the most well-known game theorists to date. John Nash found ‘the Nash equilibrium’ which is mentioned within this paper.