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Word Count: 777
GAME THEORY One possible application of Game Theory is in advertising Advertising involves the promotion of products and services so as to expose the product or service to a greater number of people The goal of advertising is to make more people aware of a companys product or service so that more people would avail of this product or service and this would mean more revenues for the company One way that a company can approach this goal is to expand the current market of consumers This would entail directing promotional activities to consumers who have never tried the product or service or anything similar to it Another way is to target the current market in the hopes of increasing market share This means that there is a base of consumers currently using the product or service but there are other companies offering the same product or service and the company would like to increase the percentage of people availing of their particular companys product or service This is the case where game theory is applicable There are other entities that a company can consider as competitors The company competes with these entities for a share of the market These entities include other companies who produce the same product or the same service Other potential competitors are companies that produce substitutes or complements to the product or service new entrants to the industry suppliers of the company and distributors of the company Game theory deals with competitive situations such as these and emphasizes the decision making process of the competitors The strategy that the company will use is composed of the decisions that it will make at every stage of the process In the case of advertising the company must decide how much to spend in a certain region for example The overall goal of using game theory in advertising is to determine how best to spend advertising money in order to capture market
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