Strategic Decision-Making—Cognitive Bias

Running head: STRATEGIC DECISION-MAKING—COGNITIVE BIAS
STRATEGIC DECISION-MAKING—COGNITIVE BIAS
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1STRATEGIC DECISION-MAKING—COGNITIVE BIAS
Game theory generally refers to the study of the matters that are related to the strategic
decision making at the basic levels. The prospect theory on the other hand deals with the ways in
which people choose between several options wherein the probable outcome is known. The
following essay attempts a comparison between the two theories. The game theory is actually
known to have been offering the perspectives that are useful in case of the strategic choices.
The game theory is often defined as the numerical study of the several numerical models
dealing with the competitions as well as the participation of the leaders who tend to demonstrate
knowledge and intelligence. The game theory suggests that people tend to demonstrate the
differences in the choices that are presented to them within the different situations that they
might face. The game theory is generally observed to have been looking into the various ways of
the strategic interaction that is faced by the concerned people in terms of the preferences that are
demonstrated by the concerned people (Murphy, 2017). The game theory tends to put forth an
assumption of the fact that there is a rationality factor that helps the concerned person in making
a decision. The game theory further states that the concerned person attempts to undertake the
best possible measures for the development of the best results that are to be received from the
implemented techniques.
The prospect theory on the other hand attempts a discussion on the ways in which the
people think and work. The propounders of the theory state that it is one of the general
tendencies of the human beings to undertake the decisions at times when they are faced with the
stress and losses rather than the issues that at the times when they might be going through the
situations of gain that they have been going through. The theory further states that people face a
huge psychological setback when they encounter the losses and thus tend to be willing towards
the risk taking in order to achieve the required success in the given field (Frydman & Camerer,