Definition
Game theory is the mathematical analysis of decision making. In game theory, the interaction between two or more players is often framed in terms of a game with a particular set of rules. Of interest may be the strategies that give optimal outcomes for each of the players or, conversely, the resulting outcomes when certain strategies are played. Many phenomena in business, politics, and evolutionary biology, for instance, can be modeled as games. [1]
The game theory is said to be the science of strategies which comes under the probability distribution. It determines logical as well as mathematical actions that should be taken by the players in order to obtain the best possible outcomes for themselves in the games. The games studied in game theory may range from chess to tennis and from child-rearing to takeovers. But there is one thing common that such an array of games is interdependent, i.e. outcome for each player depends upon the strategies of all.
In other words, game theory deals with mathematical models of cooperation and conflicts between rational decision-makers. Game theory can be defined as the study of decision-making in which the players must make strategies affecting the interests of other players. [2]
Who
Game theory is relevant to all these games, but more generally to any situation where one or more players interact, each one trying to achieve their own goal. The players can be people but they don’t need to be: they can also be animals or even other organisms! So, game theory is also used to study [3]
- biology
- business
- economics
- political science
- psychology
- social science
- sociology
What
The game theory is widely applied to study human as well as animal behaviours. It is utilized in economics to understand the economic behaviours, such as behaviours of consumers, markets and firms. Game theory has been commonly used in social sciences as well. It is applied in the study of sociological, political and psychological behaviours. The use of analysis based on game theory is seen in biology too. In addition to behavioural prediction, game theory utilized in the development of theories of normative or ethical behaviour. [2]
Why
See Theoretical Knowledge Vs Practical Application.
How
Many of the References and Additional Reading websites and Videos will assist you with understating and applying game theory.
As some professors say: “It is intuitively obvious to even the most casual observer.“
References
[1] “Game Theory.” 2023. Brilliant Math & Science Wiki. Accessed October 4. https://brilliant.org/wiki/game-theory/.
Interactions in game theory are generally modeled in terms of well defined games between two or more players. To illustrate, consider the simple game commonly known as the prisoner’s dilemma, played between Alice and Bob.
[2] “Game Theory – Definition, Application, and Example.” 2020. BYJUS. March 9. https://byjus.com/maths/game-theory/.
Game theory is a Mathematical subject that is commonly used in practical life. It is applied to various other non-mathematical fields too. Game theory explains how a strategic game is played. It determines the way or order in which the players should make moves. It considers the information for the players at each decision point.
In-game theory, the interdependence of actions of players is the essence of the game. The game has two kinds of strategic interdependence – one is sequential, and the other is simultaneous. In sequential interdependence, players act in a sequence, aware of other players actions. While, in simultaneous interdependence, players act at the same time, ignoring other players’ actions. The game theory is all about such strategies. Let us go ahead and learn more about game theory.
[3] Baez, John. “Game Theory (Part 1)”. 2023. Accessed October 4. https://math.ucr.edu/home/baez/games/games_1.html.
Additional Reading
Borad, Sanjay Bulaki. 2022. “Game Theory – Meaning, Example, Types, Importance and More.” eFinanceManagement. May 7. https://efinancemanagement.com/financial-management/game-theory.
The two most common types of game theories are cooperative game theory and non-cooperative game theory. The collaborative game theory talks about how groups or coalitions interact or behave when the payoffs are known. The game theory helps explain how (or the reason for) groups are created and how they distribute the payoff among the members within the group. In this, players benefit the maximum by cooperating. Moreover, players have nothing to gain by cheating. Cheating will result in the worst outcome. For example, driving on the right side of the road is suitable for all drivers.
Non-cooperative game theory talks about how individuals will interact with each other to achieve their objectives. This theory includes games where the available strategies and outcomes are listed. A simple example of this theory is the game Rock-Paper-Scissors. The above example of the Prisoners’ Dilemma is also an example of non-cooperative game theory.
Bruin, Lars de. 2020. “An Introduction To Game Theory: The Basics And Key Concepts.” Business. October 24. https://www.business-to-you.com/introduction-game-theory-the-basics/.
Game Theory is the analysis (or science) of rational behavior in interactive decision-making. It is therefore distinguished from individual decision-making situations by the presence of significant interactions with other ‘players’ in the game. Even though Game Theory has a mathematical origin, it is being used in fields such as economics, business, political science, psychology, computer science and even biology. For practical purposes, Game Theory can be used to help explain past events and situations, predict and forsee what actions players will take in future games, and advice clients in what actions they will have to take in interactions with other players in order to achieve the outcome that will best serve their interests. This article will go into the basics of Game Theory and provide a strong foundation from which to further build on.
de Haan, Hein. “How To Do Game Theory Chapter 1: Utility and zero-sum games”. 2023. Medium. https://medium.com/street-science/how-to-do-game-theory-b2a15122afcb.
de Haan, Hein. “How To Do Game Theory Chapter II: The Minimax algorithm”. 2023. Medium. https://medium.com/street-science/how-to-do-game-theory-f6fd73bb59be.
de Haan, Hein. “How To Do Game Theory Chapter III: Non-zero-sum games and Nash Equilibria”. 2023. Medium. https://medium.com/street-science/how-to-do-game-theory-b2a15122afcb.
de Haan, Hein. “How To Do Game Theory Chapter IV: Nash Equilibria and Pareto Efficiency”. 2023. Medium. https://medium.com/street-science/how-to-do-game-theory-5a7e290fd31c.
DeMichele, Thomas. 2016. “Game Theory Is the Science of Strategy – Fact or Myth?” Fact / Myth. July 28. https://factmyth.com/factoids/game-theory-is-the-science-of-strategy/.
Game theory is “the science of strategy,” a branch of mathematics that studies the strategy, rules, and statistics of decision making games and applies it to other fields. The data gleaned from studying games can be related to back to economics, political science, social science, business in general , or even biology to better understand decision making and behavior in that field.
The term “game” is in the title, but it is more a branch of complexity science than a study of games. In other words, your more likely to use game theory when studying high-level economics, cognitive computing, or political science than when playing Xbox.
“Game Theory.” 2023. Game Theory | Open Yale Courses. Accessed October 4. https://oyc.yale.edu/economics/econ-159.
This course is an introduction to game theory and strategic thinking. Ideas such as dominance, backward induction, Nash equilibrium, evolutionary stability, commitment, credibility, asymmetric information, adverse selection, and signaling are discussed and applied to games played in class and to examples drawn from economics, politics, the movies, and elsewhere.
“Game Theory.” 2023. GeeksForGeeks. September 28. https://www.geeksforgeeks.org/game-theory/.
Game Theory is a topic in competitive programming that involves a certain type of problem, where there are some players who play a game based on given rules and the task is often to find the winner or the winning moves. Game Theory is often asked in short contests with a mixture of other topics like range querying or greedy or dynamic programming.
“Game Theory.” 2023. Wikipedia. Wikimedia Foundation. October 4. https://en.wikipedia.org/wiki/Game_theory.
Nitisha. 2015. “5 Types of Games in Game Theory (With Diagram).” Economics Discussion. August 11. https://www.economicsdiscussion.net/game-theory/5-types-of-games-in-game-theory-with-diagram/3827.
Read this article to learn about the different Types of Games in Game Theory – explained with diagrams! In the game theory, different types of games help in the analysis of different types of problems. The different types of games are formed on the basis of number of players involved in a game, symmetry of the game, and cooperation among players. The types of games explained in this article include: Cooperative and Non-Cooperative Games, Normal Form and Extensive Form Games, Simultaneous Move Games and Sequential Move Games, Constant Sum, Zero Sum, and Non-Zero Sum Games, and Symmetric and Asymmetric Games
Simplified Business. 2021. “What Is Game Theory? And Why Is It an Important Decision-Making Tool?” Medium. May 10. https://simplifiedbusiness.medium.com/what-is-game-theory-and-why-is-it-an-important-decision-making-tool-8893578ed414.
So What Is Game Theory? I’m going to give a basic rundown on game theory and provide you with all the terms you need to know.
Videos
You can’t be good at economics if you aren’t capable of putting yourself in the position of other people and seeing things from their perspective, you just can’t. Game theory helps you do just that. Whenever you’re involved in situations in which the outcome depends not only on your actions but on the actions of other participants as well, game theory is all about helping you figure out what the best approach is based on what the other (presumed to be rational) actors are more likely to do.
Game theory is the study of human behaviour in strategic settings. It is used to solve some of the harder problems in economics. So what is a game? To have a game, you need at least two players, sometimes called agents, or, if you want to be really crazy, people. And you need payoffs for the players, you need to define the outcomes they can potentially get depending on how the game unfolds. And finally, you need rules for the game. Now, it’s not always obvious how people will behave, even with players, payoffs, and rules clearly defined. That’s why game theorists have a number of solution concepts for games, including the dominant strategy equilibrium, the Nash equilibrium, the subgame perfect Nash equilibrium, the Bayesian equilibrium, and the weak perfect Bayesian equilibrium. The most basic solution concept is the dominant strategy equilibrium. In a game, each player can have any number of possible strategies. One strategy strictly dominates another strategy if the player is always better off under that strategy no matter what other players do. If one strategy strictly dominates every other possible strategy a player could take, that strategy is a strictly dominant strategy. We have a dominant strategy equilibrium when all players play a strictly dominant strategy.
⭐ I suggest that you read the entire reference. Other references can be read in their entirety but I leave that up to you.
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Mathematical Mysteries 