In this week Economist there’s a very interesting article about game theory, a branch of mathematics which is used to work out how events will unfold as people and organisations act in what they perceive to be their best interests. Bruce Bueno de Mesquita is a political Scientist, professor at New York University and senior fellow at Stanford University‘s Hoover Institution. He founded the company, Mesquita & Roundell, which specialises in making political and foreign-policy forecasts: 90% of their results are accurate to the real facts!

Forecasting behaviour using game theory is proving especially useful when applied to economics. Applied game theory tools have proven their ability in assisting decision-makers predict the outcome of negotiations and increasing their ability to influence others, for instance by anticipating reactions from political parties.

As negotiators everywhere know, the first side to disclose all that it is willing to sacrifice (or pay) loses considerable bargaining power. If you are not able to put your opponent under pressure, your side can be pushed back to its bottom line by a clever opponent. But if neither side reveals the concessions it is prepared to make, negotiations can stall or collapse.

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