Application of game theory in economics

As the main source of economic growth, investments are predicated on savings of the economic agents. Savings are transformed into investments via financial markets. Financial markets also act as a remarkable incentive for savings by providing the investors with substantial returns. In this context, it is crucial to possess sound decisionmaking mechanism for the financial markets in order to fulfill those functions. Since these markets are under the effect of many socio-economical variables, they involve certain degrees of risk and uncertainty. Moreover, interactions among those variableswithin the economy are rendered imperative to be taken into consideration throughout the decision-making process. Game theory reveals much better results than other known methods used for the analysis of decision-making mechanisms under such mutual interactions and uncertainty. In this study, the basic concepts regarding the Game Theory are mentioned and the theoretical framework is built on three sections such as, zero-sum games, nonzerosum games and extensive-formed games. In application part, formation of a portfolio at the minimum risk level and with maximum level of returns and evaluation of current status of the market from a strategic point of view by estimating differentiation in rates of return of the portfolio stocks via game theory approach are aimed. Consequently, efforts are spared to determine performance course and stationary state of the rates of return for the portfolio stocks.