What differences exist between game theory, business simulation and gamification?

For several years, new trends have also emerged in Romania on the training market. Courses and workshops often use business simulation and gamification. As we are active on the training market with a business strategy course, which has the word - game in the name, - The Game Theory in Business - we have found in the presentations made to the companies, that they frequently make confusion between these three notions - game theory, business simulation and gamification / gamming.

To clarify things I will explain these three notions.

What is the theory of games?

It is a branch of mathematics, being used in many fields of activity, such as law, economics, finance, politics, management, social entrepreneurship, even in biology and epidemiology. It is even considered a branch of microeconomics since 1944. As any science, game theory is an organized and coherent set of knowledge acquired through scientific research; contains patterns that can be used to make predictions and that can be tested by experiment or observation. Game theory, in business, is an abstract model of decision-making. With its help, are identified decision options and are defined the decision-making rules in the competitive market, so that to maximize our profit. Based on the concepts of game theory, you will understand and anticipate before competitors what is likely to happen on the market you are activating, thus gaining a competitive edge.

What is simulation?

It is a technique, used quite frequently, which reproduces certain 'experiences'. The name comes from the Latin -simulatio, which means to reproduce, represent or imitate something. So with the help of simulations we reproduce situations, interactions, phenomena, objects in order to study them, without having to observe them when they manifest themselves in real life. Simulations are very useful tools that allow experimentation without exposure to risk, are simplifications of reality because they include only a few of the factors from the real world and are as good as the real life experience, or as the fundamental hypothesis (if we are talking about anticipation future effects) used to carry out the research.

 A simulation can be accomplished by: solving a set of equations (a mathematical model), building a physical (scale) pattern, rehearsals, internships, games (such as strategy games), or a computer model.

What is gamification?

The word, gamification is related to Nick Pelling's name and, of course, to computer games.

Nick Pelling used it to define a feature that had to be added to the interface of electronic devices to enhance their using attractiveness, for their users. More specifically, Pelling referred to "increasing the attractiveness of electronic devices using game-style graphical interfaces to make electronic transactions more enjoyable and faster" when using this word, gamification.

The notion of gamification is used today, with a different meaning than Nick Pealling's, namely the presence or addition of game-specific features in activities that are not traditionally considered games, in order to enhance their attractiveness and interactivity. So it assumes the use of elements of games, game rules, gain or benefit transposed into real life, so that people involved in different activities perceive them in a more entertaining way, thus improving the final outcome.

Let's think what a game is: it's an interaction between players who follow to a set of rules and involve a win, a benefit. This gain or benefit occurs for one or more players involved in a game, each time the game is repeated.

Now that you know what are the game theory, the simulation and the gamification, let's identify them in a concrete example.

If we take our course - Game Theory in Business - the course teaches the notions of game theory (dominant strategy, Nash equilibrium, safe strategy, mixt, triggering, etc.) based on simulations in which 2 groups compete, representing two competing companies that have to make their maximizing profit decisions on specific business issues such as price setting, whether to do advertising or not, employee monitoring, negotiations, regulation, etc. These hypothetical business situations, very close to what exists in reality, are simulations and they are simplified compared to real-life ones, meaning that in making decisions, each company's profit is taken into account, without making all the work to determine it; is considered the interaction between 2 competitors, even if in reality there are more than 2 competing companies on the market; we use data that is not the real one, recorded in company accounts.

Gamification is also used because each group must follow to certain rules (they have a time frame within which they must answer, they must be correct, they should not discuss with the competition, write the answer on a paper, and hand it in the envelope to the trainer etc.) and for each correct answer to the problems to solve (described in the simulations), each group receives points. In the end, the group that has earned more points is declared winner (this is the win or the benefit gained in the game).

I hope it is clear now that the 3 notions - game theory, business simulation, and gamification are not meaning the same thing and I hope the number of those who think they know the game theory, just because they have done business simulations, or, because they have participated in courses where gamification has been used, will be significantly reduced among those who read this article. You have the opportunity to contribute to diminishing number of those who confuse between these notions, by distributing this article on the social networks.

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Accent Serv International SRL (www.accentserv.ro/en) is a business consultancy company which aims to increase the profitability of the companies. We organize our training Game Theory in Business! For more details you may contact us at [email protected] .

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