Game theory
Game Theory
Game theory (pronounced: /ɡeɪm θɪəri/) is a branch of mathematics that studies strategic interactions, meaning situations where the outcome for each participant or "player" depends on the actions of all.
Etymology
The term "game theory" was coined by mathematician John von Neumann and economist Oskar Morgenstern in their 1944 book, Theory of Games and Economic Behavior. The word "game" in this context means a formalized setting of strategic interaction, not necessarily a recreational activity.
Definition
In game theory, a game is defined by its players, the actions or strategies they can take, and the payoffs they receive for different combinations of actions. Games can be represented in various ways, such as extensive form (game trees) or normal form (payoff matrices).
Types of Games
There are many types of games in game theory, including:
- Cooperative games: Games where binding agreements are possible.
- Non-cooperative games: Games where binding agreements are not possible.
- Simultaneous games: Games where players make decisions at the same time.
- Sequential games: Games where players make decisions in turn.
- Zero-sum games: Games where one player's gain is another's loss.
- Non-zero-sum games: Games where the players' interests are not directly opposed.
Applications
Game theory has applications in a wide range of fields, including economics, political science, psychology, computer science, biology, and philosophy. It is used to model and analyze situations as diverse as competition and cooperation between firms, negotiation and conflict resolution, social and political decision-making, and even animal behavior and evolution.
Related Terms
- Nash equilibrium: A concept of game theory where the optimal outcome of a game is one where no player has an incentive to deviate from his chosen strategy after considering an opponent's choice.
- Prisoner's dilemma: A standard example of a game analyzed in game theory that shows why two completely rational individuals might not cooperate, even if it appears that it is in their best interests to do so.
- Dominant strategy: In game theory, a dominant strategy is the course of action that results in the highest payoff for a player regardless of what the other players do.
External links
- Medical encyclopedia article on Game theory
- Wikipedia's article - Game theory
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