"Game Theory" is actually a theory in-and-of itself. It's basically the case that the "best" move isn't always the universally "best" move or that each individual in a game has his or her own move which affects everyone else, but otherwise isn't the same and otherwise is "better" for their situation. such as whether to bluff or fold in a poker match.
And to put it into AM terms - if we are looking to maximise our long term returns, we can either drive for what we think is the best option for us individually (100% LF all of the time) or we can realise that by doing this, we force others who believe the same to respond, which means that we end up with routes which did bring in 100000€ now bringing in 1000€. Game theory would suggest that the best way to maximise returns is to play to maximise group returns - so accepting that running a route at 85% (for example - I have no idea where the break point is, I suspect Air Elbonia might have a better idea of that
) for game years at the same price will bring in long term profit maximisation than running it at 100% with a steadily declining price. Game theory also suggests that of course there will be some people who won't do this, which means everyone faces an environment in which fares on routes steadily decline as a consequence, since all other players will have their levels at which they have to act to preserve their own profits.
I'm not an expert on game theory - it's a tool that can be used in my field for trying to predict behavioural outcomes so as such I can recognise situations when it applies - and AM is definitely one of those. This individual benefit (but longterm detriment) versus group benefit (with longterm benefit) is a pretty classic situation (hence reference to prisoner's dilemma, the ultimate in classic game theory, which anyone who has ever had to study it will have been quoted as an example). Some of those effectively playing to group benefit will actually be following an individual benefit strategy, but be constrained by time (ie cannot adjust all routes 24 hours a day all the time - I guess if there was some automated way to do this for them, they'd be using it religiously and maintaining a LF very close to 100% - which of course would be even more detrimental to all players, since fares would be dropping that much more quickly!) - and from posts I've seen on here, a number of players have also realised that chasing the 100% LF all of the time is counter-productive for maintaining a good profit in the long term.
So there we have it - game theory and its application to AM
