This paper is about game theory and its application in economics and everyday life. Game theory is a method that deals with making decisions in which the outcome depends not only on one player, but also on the decisions of other players. In game theory, no player has complete control over outcomes. The goal of game theory is to determine the optimal strategy for each player. Game theory has found its application in many areas, economics, politics, law, biology, psychology and everyday situations such as arguments, negotiations etc. The history of game theory goes back to the 18th century, but the biggest development took place in 1944, and the key figures for that development were the mathematicians John Von Neumann and Oskar Morgenstern. This paper defines the concept of game theory itself, its development, terminology and types of games. Different games that can be used for the purpose of making decisions are also listed and the most famous of them is the Prisoner's dilemma. Also, this paper describes through examples how game theory is used in economics through price competition in a duopoly, examination of market entry and the impact of game theory on international competitiveness. The paper also shows how game theory can be applied to everyday situations.