Part 1

Background to Game Theory

Part one introduces some of the basic elements of Game Theory. Not the most appetising way to start a book, but, as a rudimentary knowledge of Game Theory is going to be essential to anyone using the Internet for business it is best to get this propeller head stuff out of the way first.

You might well ask why Game Theory should be so important in e-business. It is because Game Theory is the most appropriate framework for dealing with uncertainty, unknowns, complexity and competition. This is the environment in which e-business will be conducted. It is an environment where conventional business methods and procedures are severely compromised and start to break down.

Conventional business is based upon eliminating uncertainty wherever possible to allow reasonably accurate predictions to be made. This is fine if you know what uncertainties there are, but, in the fast moving world of communication technology this is not possible. Predictions are therefore always highly suspect.

Game theory is based upon the enigmatic and counter intuitive effects of the laws of chance and probability. These effects defy logical explanation, but, this is why Game Theory is useful: it works when logical reasoning cannot come up with the right answers.