Role of Game Theory in rational decision making: The case of KTDA managed factories

The governance of tea factories managed by Kenya Tea development Agency (KTDA) is by factory company directors who are elected by tea farmers (the shareholders). The major expectation from the directors by the farmers is high returns from the tea sales. Since tea industry in Kenya is a price taker, the directors cannot determine the price of the tea in the international market and are not able to meet the farmers’ expectations. To improve the returns, the directors can improve the quality of tea and minimize on operational costs through improvement of the factory operations and the infrastructure in the tea catchment area. The farmers fail to understand the objectives of the directors’ spending money on such projects and accuse them of the low returns. The directors results to using game theory in their decision making. This paper looks at the influence of game theory in decision making in KTDA managed factories in Kirinyaga County. The study uses primary data from sampled respondents, whereas a self-administered questionnaire is used for collection of data. Data analysis is by use of SPSS. The frequencies, mean, median, standard deviation and skewedness are used to examine the data. The study indicates that game theory has an influence on the decision making in the KTDA managed factories where cooperative game is used. The paper recommends that KTDA managed factories to fully involve the farmers’ in decision making, as this will minimize information asymmetry and improve on decision making in the factories.