Game Theory and Strategic Management: Navigating the Usefulness of Game-Theoretic Tools in a Dynamic Corporate Environment

This article examines the relationship between strategic management and game theory, and how game-theoretic tools can guide strategic decision-making. onsidering the interdependence between competitors and the dynamism of the corporate world, the article explores how game-theoretic tools help in selecting effective strategies that maximize company outcomes. It does so by reviewing the historical development of both fields and examining relevant literature on their intersection. To further explore the relationship between the two concepts, an R-based simulation is employed to compare the outcomes of game-theoretic strategies with those formed independently by firms, without accounting for competition. The study showed that when decisions were made using game-theoretic principles, specifically those derived from the prisoner's dilemma framework, market outcomes were consistently more favorable. This was achieved by simulating a duopolistic market with two competitors adopting either aggressive or conservative marketing strategies. The simulations run in R Studio showed that both players had larger average market shares when they took into account their competitors' expected reactions and strategic foresight. These findings highlight the importance of game theory in sectors where the behavior of rivals is highly interrelated.