Who is the founder of game theory?
Game theory is largely attributed to the work of mathematician John von Neumann and economist Oskar Morgenstern in the 1940s, and was developed extensively by many other researchers and scholars in the 1950s. It remains an area of active research and applied science to this day.
What inspired John von Neumann to develop game theory?
For Von Neumann, the inspiration for game theory was poker, a game he played occasionally and not terribly well. Von Neumann realized that poker was not guided by probability theory alone, as an unfortunate player who would use only probability theory would find out.
Is game theory the science of strategy?
In some respects, game theory is the science of strategy, or at least the optimal decision-making of independent and competing actors in a strategic setting. The key pioneers of game theory were mathematicians John von Neumann and John Nash, as well as economist Oskar Morgenstern.
What is game theory in the 1950s?
Game theory experienced a flurry of activity in the 1950s, during which the concepts of the core, the extensive form game, fictitious play, repeated games, and the Shapley value were developed. The 1950s also saw the first applications of game theory to philosophy and political science .
How Did game theory originate?
Modern game theory began with the idea of mixed-strategy equilibria in two-person zero-sum game and its proof by John von Neumann. Von Neumann's original proof used the Brouwer fixed-point theorem on continuous mappings into compact convex sets, which became a standard method in game theory and mathematical economics.
Who is known as father of game theory?
John von Neumann, whom people called Johnny, was a brilliant mathematician and physicist who also made three fundamental contributions to economics. The first is a 1928 paper written in German that established von Neumann as the father of game theory.
Who is the most famous game theorist?
Shapley is often called the giant of game theory and he did indeed have a thing for games.
What is game theory von Neumann?
The fundamental theorem of John von Neumann's game theory states that in a broad category of games it is always possible to find an equilibrium from which neither player should deviate unilaterally.
What was the first game theory?
Game Theory is the first and most popular series of The Game Theorists. It was created and is hosted by Matthew Patrick....Game TheoryHost(s)MatPatIntroScience BlasterSlogan"That's just a theory"RunApril 18, 2011 - Present7 more rows
How did John Nash invent game theory?
He started out by defining a particular solution to games—one marked by the fact that each player is making out the best he or she (or it) possibly can, given the strategies being employed by all of the other players.
What is the #1 game in the world?
The top #1 most played popular game in the world right now is Minecraft. Released back on 18 November 2011, Mojang Studios was able to sell above 238 million copies of the game across all platforms, with around 600 registered players. Minecraft has a good track record with constant updates and version releases.
Who is the No 1 game developer in the world?
Sony Group Corporation Sony remains the biggest video game company in the world in 2022. The Japanese tech giant now makes most of its gaming revenue, which totaled $24.9 billion last year, with the PlayStation 5 which came out in 2020 and became the world's most popular next-gen video game console.
Is game theory still relevant?
Game theory is applied in a number of fields, including business, finance, economics, political science, and psychology. Understanding game theory strategies—both the popular ones and some of the relatively lesser-known stratagems—is important to enhance one's reasoning and decision-making skills in a complex world.
Is game theory math or economics?
Game theory is a branch of mathematics used primarily in economics, political science, and psychology. This talk will define what a game is and discuss a variety of ways in which games can be classified and described.
What is game theory in a nutshell?
0:121:28Game Theory Explained in One Minute - YouTubeYouTubeStart of suggested clipEnd of suggested clipAnd give his $100. Game theory doesn't study situations like this one. Instead it studies situationsMoreAnd give his $100. Game theory doesn't study situations like this one. Instead it studies situations involving more than one participant. And in which not everything depends on one person. For example
What is the game theory theme called?
Science Blaster"Science Blaster" is the name given to the opening theme of the Game Theory intro. There has been a few variations of the intro throughout Game Theory. The opening theme was created by Idiot9point0 and ZRovas117 and the animations by SpellingPhailer.
Who is the father of modern game?
Pierre de Coubertin: Visionary and Founder of the Modern Olympics.
What is game theory name?
Matthew Robert Patrick (born November 15, 1986), also known by his nickname MatPat, is an American YouTuber; co-creator of the YouTube channels The Game Theorists, The Film Theorists, GTLive, and The Food Theorists; and co-founder, president, and CEO of Theorist Media.
Who is the new guy on game theory?
WarnerMedia property HBO said its new show “Game Theory” with Bomani Jones would start March 13, featuring six episodes that each run 30 minutes.
Who is Austin game theory?
Austin Hourigan is the host of The Game Theorists and former Shoddycast series The SCIENCE!. His videos focus on studying the science behind occurrences in popular games. As of June 25, 2018, Austin has sixty "The SCIENCE!" videos, twenty-four on The Game Theorists and the other thirty-six on Shoddycast.
Who developed game theory?
In fact, game theory was originally developed by the Hungarian-born American mathematician John von Neumann and his Princeton University colleague Oskar Morgenstern, a German-born American economist, to solve problems in economics.
What is game theory?
Game theory, branch of applied mathematics that provides tools for analyzing situations in which parties, called players, make decisions that are interdependent. This interdependence causes each player to consider the other player’s possible decisions, or strategies, in formulating strategy. A solution to a game describes the optimal decisions ...
What is a solution to a game?
A solution to a game describes the optimal decisions of the players, who may have similar, opposed, or mixed interests, and the outcomes that may result from these decisions. Although game theory can be and has been used to analyze parlour games, its applications are much broader.
What is extensive form in parlour games?
Extensive-form games can be described by a “game tree,” in which each turn is a vertex of the tree, with each branch indicating the players’ successive choices.
How to describe a game?
Extensive-form games can be described by a “game tree,” in which each turn is a vertex of the tree, with each branch indicating the players’ successive choices.
What is a one person game?
One-person games. One-person games are also known as games against nature. With no opponents, the player only needs to list available options and then choose the optimal outcome. When chance is involved the game might seem to be more complicated, but in principle the decision is still relatively simple.
What is a constant sum game?
The extent to which the goals of the players coincide or conflict is another basis for classifying games. Constant-sum games are games of total conflict, which are also called games of pure competition. Poker, for example, is a constant-sum game because the combined wealth of the players remains constant, though its distribution shifts in ...
Who developed game theory?
Game theory in the form known to economists, social scientists, and biologists, was given its first general mathematical formulation by John von Neuman and Oskar Morgenstern ( 1944 ). For reasons to be discussed later, limitations in their formal framework initially made the theory applicable only under special and limited conditions. This situation has dramatically changed, in ways we will examine as we go along, over the past seven decades, as the framework has been deepened and generalized. Refinements are still being made, and we will review a few outstanding problems that lie along the advancing front edge of these developments towards the end of the article. However, since at least the late 1970s it has been possible to say with confidence that game theory is the most important and useful tool in the analyst’s kit whenever she confronts situations in which what counts as one agent’s best action (for her) depends on expectations about what one or more other agents will do, and what counts as their best actions (for them) similarly depend on expectations about her.
How to explain evolutionary game theory?
The principles of evolutionary game theory are best explained through examples. Skyrms begins by investigating the conditions under which a sense of justice—understood for purposes of his specific analysis as a disposition to view equal divisions of resources as fair unless efficiency considerations suggest otherwise in special cases—might arise. He asks us to consider a population in which individuals regularly meet each other and must bargain over resources. Begin with three types of individuals: 1 Fairmen always demand exactly half the resource. 2 Greedies always demand more than half the resource. When a greedy encounters another greedy, they waste the resource in fighting over it. 3 Modests always demand less than half the resource. When a modest encounters another modest, they take less than all of the available resource and waste some.
How does game theory help in neuroeconomics?
First, game theory has been used to predict the computations that individual neurons and groups of neurons serving the reward system must perform. In the best publicized example, Glimcher (2003) and colleagues have fMRI-scanned monkeys they had trained to play so-called ‘inspection games’ against computers. In an inspection game, one player faces a series of choices either to work for a reward, in which case he is sure to receive it, or to perform another, easier action (“shirking”), in which case he will receive the reward only if the other player (the “inspector”) is not monitoring him. Assume that the first player’s (the “worker’s”) behavior reveals a utility function bounded on each end as follows: he will work on every occasion if the inspector always monitors and he will shirk on every occasion if the inspector never monitors. The inspector prefers to obtain the highest possible amount of work for the lowest possible monitoring rate. In this game, the only NE for both players are in mixed strategies, since any pattern in one player’s strategy that can be detected by the other can be exploited. For any given pair of specific utility functions for the two players meeting the constraints described above, any pair of strategies in which, on each trial, either the worker is indifferent between working and shirking or the inspector is indifferent between monitoring and not monitoring, is a NE.
What is rationality in game theory?
Game theorists assume that players have sets of capacities that are typically referred to in the literature of economics as comprising ‘rationality’. Usually this is formulated by simple statements such as ‘it is assumed that players are rational’. In literature critical of economics in general, or of the importation of game theory into humanistic disciplines, this kind of rhetoric has increasingly become a magnet for attack. There is a dense and intricate web of connections associated with ‘rationality’ in the Western cultural tradition, and the word has often been used to normatively marginalize characteristics as normal and important as emotion, femininity and empathy. Game theorists’ use of the concept need not, and generally does not, implicate such ideology. For present purposes we will use ‘economic rationality’ as a strictly technical, not normative, term to refer to a narrow and specific set of restrictions on preferences that are shared by von Neumann and Morgenstern’s original version of game theory, and RPT. Economists use a second, equally important (to them) concept of rationality when they are modeling markets, which they call ‘rational expectations’. In this phrase, ‘rationality’ refers not to restrictions on preferences but to non -restrictions on information processing: rational expectations are idealized beliefs that reflect statistically accurately weighted use of all information available to an agent. The reader should note that these two uses of one word within the same discipline are technically unconnected. Furthermore, original RPT has been specified over the years by several different sets of axioms for different modeling purposes. Once we decide to treat rationality as a technical concept, each time we adjust the axioms we effectively modify the concept. Consequently, in any discussion involving economists and philosophers together, we can find ourselves in a situation where different participants use the same word to refer to something different. For readers new to economics, game theory, decision theory and the philosophy of action, this situation naturally presents a challenge.
How do economists test theories?
Economists have been testing theories by running laboratory experiments with human and other animal subjects since pioneering work by Thurstone (1931) . In recent decades, the volume of such work has become positively gigantic. The vast majority of it sets subjects in microeconomic problem environments that are imperfectly competitive. Since this is precisely the condition in which microeconomics collapses into game theory, most experimental economics has been experimental game theory. It is thus difficult to distinguish between experimentally motivated questions about the empirical adequacy of microeconomic theory and questions about the empirical adequacy of game theory.
What is it called when all agents are involved in a game?
Agents involved in games are referred to as players . If all agents have optimal actions regardless of what the others do, as in purely parametric situations or conditions of monopoly or perfect competition (see Section 1 above) we can model this without appeal to game theory; otherwise, we need it.
How can a player improve her outcome in a game?
In some games, a player can improve her outcome by taking an action that makes it impossible for her to take what would be her best action in the corresponding simultaneous-move game. Such actions are referred to as commitments, and they can serve as alternatives to external enforcement in games which would otherwise settle on Pareto-inefficient equilibria.
Who came up with game theory?
Game theory is largely attributed to the work of mathematician John von Neumann and economist Oskar Morgenstern in the 1940s and was developed extensively by many other researchers and scholars in the 1950s. It remains an area of active research and applied science to this day.
What Is Game Theory?
Game theory is a theoretical framework for conceiving social situations among competing players. In some respects, game theory is the science of strategy, or at least the optimal decision-making of independent and competing actors in a strategic setting.
What are some of the assumptions about these games?
Like many economic models, game theory also contains a set of strict assumptions that must hold for the theory to make good predictions in practice. First, all players are utility-maximizing rational actors that have full information about the game, the rules, and the consequences. Players are not allowed to communicate or interact with one another. Possible outcomes are not only known in advance but also cannot be changed. The number of players in a game can theoretically be infinite, but most games will be put into the context of only two players.
What is equilibrium in a game?
Equilibrium : The point in a game where both players have made their decisions and an outcome is reached
How did game theory change economics?
Game theory brought about a revolution in economics by addressing crucial problems in prior mathematical economic models. For instance, neoclassical economics struggled to understand entrepreneurial anticipation and could not handle the imperfect competition. Game theory turned attention away from steady-state equilibrium toward the market process.
What is a game?
Game : Any set of circumstances that has a result dependent on the actions of two or more decision-makers (players)
Why is game theory important?
For example, businesses may face dilemmas such as whether to retire existing products or develop new ones, lower prices relative to the competition, or employ new marketing strategies. Economists often use game theory to understand oligopoly firm behavior. It helps to predict likely outcomes when firms engage in certain behaviors, such as price-fixing and collusion .
How Was Game Theory Developed?
Game theory was originally an economic and mathematical theory that predicted that human interaction had the characteristics of a game, including strategies, winners and losers, rewards and punishment, and profits and cost. It was initially developed to understand a large variety of economic behaviors, including behavior of firms, markets, and consumers. The use of the game theory has since expanded in the social sciences and has been applied to political, sociological, and psychological behaviors as well.
What is game theory?
By. Ashley Crossman. Updated March 01, 2019. Game theory is a theory of social interaction, which attempts to explain the interaction people have with one another. As the name of the theory suggests, game theory sees human interaction as just that: a game. John Nash, the mathematician who was featured in the movie A Beautiful Mind is one ...
Why is game theory criticized?
This particular view of game theory has been criticized because the assumptions made by the game theorists are often violated. For example, they assume that players always act in a way to directly maximize their wins, when in reality this is not always true. Altruistic and philanthropic behavior would not fit this model.
Why is game theory so controversial?
Game theory was first used to describe and model how human populations behave. Some scholars believe that they can actually predict how actual human populations will behave when confronted with situations analogous to the game being studied. This particular view of game theory has been criticized because the assumptions made by ...
What is a simultaneous move game?
Simultaneous move games: Players choose actions simultaneously. For example, in the Prisoner’s Dilemma (see below), each player must anticipate what their opponent is doing at that moment, recognizing that the opponent is doing the same.
What is one shot game?
One-shot games: The play of the game occurs only once. Here, the players are likely to not know much about each other. For example, tipping a waiter on your vacation.
What is a sequence move game?
Sequential move games: Players choose their actions in a particular sequence. For example, in chess or in bargaining/negotiating situations, the player must look ahead in order to know what action to choose now. One-shot games: The play of the game occurs only once. Here, the players are likely to not know much about each other.
Who was the first person to develop a game theory?
In 1921, Emile Borel , a French mathematician, published several papers on the theory of games. He used poker as an example and addressed the problem of bluffing and second-guessing the opponent in a game of imperfect information. Borel envisioned game theory as being used in economic and military applications. Borel's ultimate goal was to determine whether a "best" strategy for a given game exists and to find that strategy. While Borel could be arguably called as the first mathematician to envision an organized system for playing games, he did not develop his ideas very far. For that reason, most historians give the credit for developing and popularizing game theory to John Von Neumann, who published his first paper on game theory in 1928, seven years after Borel.
What was Von Neumann's contribution to quantum theory?
Despite his personality quirks, no one could dispute that Von Neumann was brilliant. Beginning in 1927, Von Neumann applied new mathematical methods to quantum theory. His work was instrumental in subsequent "philosophical" interpretations of the theory. For Von Neumann, the inspiration for game theory was poker, ...
What did John Neumann do with his memory?
Von Neumann used his phenomenal memory to compile an immense library of jokes which he used to liven up a conversation. Von Neumann loved games and toys, which probably contributed in great part to his work in Game Theory.
What did Von Neumann mean by "bluffing"?
Von Neumann wanted to formalize the idea of "bluffing," a strategy that is meant to deceive the other players and hide information from them. In his 1928 article, "Theory ...
What did Von Neumann do?
Born in Budapest, Hungary, in 1903, Von Neumann distinguished himself from his peers in childhood for having a photographic memory, being able to memorize and recite back a page out of a phone book in a few minutes. Science, history, and psychology were among his many interests; he succeeded in every academic subject in school.
Why was Von Neumann's intersection called "Von Neumann Corner"?
According to William Poundstone's Prisoner's Dilemma, "an intersection in Princeton was nicknamed "Von Neumann Corner" for all the auto accidents he had there." (p.25)
What did Neumann do in 1926?
By 1926, he received his Ph.D. in mathematics with minors in physics and chemistry. By his mid-twenties, von Neumann was known as a young mathematical genius and his fame had spread worldwide in the academic community. In 1929, he was offered a job at Princeton.
Who developed game theory?
Game theory in the form known to economists, social scientists, and biologists, was given its first general mathematical formulation by John von Neuman and Oskar Morgenstern ( 1944 ). For reasons to be discussed later, limitations in their formal framework initially made the theory applicable only under special and limited conditions. This situation has dramatically changed, in ways we will examine as we go along, over the past seven decades, as the framework has been deepened and generalized. Refinements are still being made, and we will review a few outstanding problems that lie along the advancing front edge of these developments towards the end of the article. However, since at least the late 1970s it has been possible to say with confidence that game theory is the most important and useful tool in the analyst’s kit whenever she confronts situations in which what counts as one agent’s best action (for her) depends on expectations about what one or more other agents will do, and what counts as their best actions (for them) similarly depend on expectations about her.
What is game theory?
Game theory is the study of the ways in which interacting choices of economic agents produce outcomes with respect to the preferences (or utilities) of those agents, where the outcomes in question might have been intended by none of the agents. The meaning of this statement will not be clear to the non-expert until each ...
What is one shot game?
So far we’ve restricted our attention to one-shot games, that is, games in which players’ strategic concerns extend no further than the terminal nodes of their single interaction. However, games are often played with future games in mind, and this can significantly alter their outcomes and equilibrium strategies. Our topic in this section is repeated games, that is, games in which sets of players expect to face each other in similar situations on multiple occasions. We approach these first through the limited context of repeated prisoner’s dilemmas.
What is the enterprise of changing institutional and informational structures so as to make efficient outcomes more likely in the games that agents?
The enterprise of changing institutional and informational structures so as to make efficient outcomes more likely in the games that agents (that is, people, corporations, governments, etc.) actually play is known as mechanism design , and is one of the leading areas of application of game theory.
What is behavioral game theory?
Behavioral game theory, by contrast, can be understood as a refinement of game theory, though not necessarily of its solution concepts, in a different sense. It restricts the theory’s underlying axioms for application to a special class of agents, individual, psychologically typical humans.
What is it called when all agents are involved in a game?
Agents involved in games are referred to as players . If all agents have optimal actions regardless of what the others do, as in purely parametric situations or conditions of monopoly or perfect competition (see Section 1 above) we can model this without appeal to game theory; otherwise, we need it.
Can game theory be applied by itself?
There is no way of applying game theory ‘all by itself’, independently of other modelling technologies. Using terminology standard in the philosophy of science, one can test a game-theoretic model of a phenomenon only in tandem with ‘auxiliary assumptions’ about the phenomenon in question.
What is game theory?
Game theory is concerned with situations where decisions interact – where the “payoff” or reward for a decision maker depends not only on his or her own decision but also on the decisions of others. Such situations are pervasive in real life.
What is Nash's contribution to game theory?
While Nash is best known for his contribution to non-cooperative game theory, he also made a seminal contribution to cooperative game theory with the development of the Nash bargaining solution. Nash’s work has had a profound impact in economics. Knowledge of game theory is essential training for every professional economist ...
How to play Nash equilibrium?
Consider a driver approaching an intersection. She stops when she approaches a red light and she continues without concern when she approaches a green light. It is a Nash equilibrium when all drivers behave this way. When approaching a red light it is best to stop since the crossing traffic has a green light and will continue. When approaching a green light it is best to continue since the crossing traffic has a red light and will stop. Thus it is in each driver’s own interest to play her part in the equilibrium, given that everyone else does. No traffic cop is required.
Who extended the notion of Nash equilibrium to deal with dynamic interactions?
Reinhardt Selten extended the notion of Nash equilibrium to deal with dynamic interactions, in which one or more decision-makers observe the action of another before taking their own action. In 1994, Nash shared the Nobel Prize in Economics with Harsanyi and Selten for these contributions. While Nash is best known for his contribution ...
What is the serve and return behavior of professional tennis players consistent with?
Interestingly, data collected from championship tennis matches has shown that the serve-and-return behaviour of professional players is consistent with both von Neumann’s Minimax Theory and Nash’s generalisation.
Who was the first person to explain the origins of the universe?
Many have talked about the universe and its beginnings, though the first to put forward a proper theory was Georges Lemaitre, a Belgian mathematician, astronomer and priest.
What is the leading theory of the universe?
One of those is the origin of the universe itself. The leading theory is that the universe came to be through some sort of ‘Big Bang’. What exactly does this theory entail and who’s behind it?
How long ago did the singularity come into existence?
This single point – or singularity – is believed to have come into existence approximately 13.8 billion years ago. It was extremely dense and its temperature was incredibly high. For some reason, this compacted ball of matter began expanding and as it did, it became a lot less dense and cooled down significantly, enabling laws of physics to come into effect.
When did Lemaitre publish his theory?
Lemaitre published a more in-depth version of his theory in 1933 that earned him even more recognition and cemented his reputation as a leading cosmologist. His idea, which came to be supported by a number of discoveries made over the next few decades, is the building block on which modern astronomy is based.
When did Belgium win the Francqui Prize?
The Francqui Prize in 1934 – this is Belgium’s top distinction for scientists
Who were the three scientists who were awarded the Nobel Prize for Physics?
In 2011, a team of three scientists – Saul Perimutter, Brian P. Schmidt and Adam G. Riess – received the Nobel Prize in Physics. The team were awarded the prize for observing distant supernovae to prove the accelerating expansion of the universe. This work would not have been carried out at the time, had it not been for Lemaitre and his fundamental Big Bang theory.
Is the Big Bang a discovery?
The Big Bang isn’t a discovery as such ; it’s more of a theory. While it can’t be definitively proven, it is generally accepted by many as the most likely origin of the universe. It states that since galaxies and other components of the universe are gradually moving away from one another, the universe must be expanding. If you reverse the expansion, you get to a point where everything in the universe – that is to say, each and every atom – is condensed into a single point that’s the beginning of both space and time.
Philosophical and Historical Motivation
Basic Elements and Assumptions of Game Theory
- 2.1 Utility
An economic agent is, by definition, an entity withpreferences. Game theorists, like economists and philosophersstudying rational decision-making, describe these by means of anabstract concept called utility. This refers to some ranking,on some specified scale, of the subjective wel… - 2.2 Games and Rationality
All situations in which at least one agent can only act to maximizehis utility through anticipating (either consciously, or justimplicitly in his behavior) the responses to his actions by one ormore other agents is called a game. Agents involved in gamesare referred to as players. If all agents h…
Uncertainty, Risk and Sequential Equilibria
- The games we’ve modeled to this point have all involved playerschoosing from amongst pure strategies, in which each seeks asingle optimal course of action at each node that constitutes a bestreply to the actions of others. Often, however, a player’sutility is optimized through use of a mixed strategy, inwhich she flips a weighted coin amongst several possible actions. (Wewill see …
Repeated Games and Coordination
- So far we’ve restricted our attention to one-shotgames, that is, games in which players’ strategic concernsextend no further than the terminal nodes of their single interaction.However, games are often played with future games in mind,and this can significantly alter their outcomes and equilibriumstrategies. Our topic in this section is repeated games, thatis, games in which sets o…
Team Reasoning and Conditional Games
- Following Lewis’s (1969) introduction of coordination games into the philosophical literature,the philosopher Margaret Gilbert (1989) argued, as against Lewis, that game theory is the wrong kind ofanalytical technology for thinking about human conventions because,among other problems, it is too ‘individualistic’, whereasconventions are essentially social phenomena. More directly, her …
Commitment
- In some games, a player can improve her outcome by taking an actionthat makes it impossible for her to take what would be her best actionin the corresponding simultaneous-move game. Such actions are referredto as commitments, and they can serve as alternatives toexternal enforcement in games which would otherwise settle onPareto-inefficient equilibria. Consider th…
Evolutionary Game Theory
- Gintis (2009b, 2009b) feels justified in stating that “game theory is auniversal language for the unification of the behavioralsciences.” There are good examples of such unifying work.Binmore (1998, 2005a) models social history as a series of convergences onincreasingly efficient equilibria in commonly encountered transactiongames, interrupted by episodes in which some people try t…
Game Theory and Behavioral Evidence
- In earlier sections, we reviewed some problems that arise fromtreating classical (non-evolutionary) game theory as a normativetheory that tells people what they ought to do if they wish to berational in strategic situations. The difficulty, as we saw, is thatthere seems to be no one solution concept we can unequivocallyrecommend for all situations, particularly where agen…
Looking Ahead: Areas of Current Innovation
- In 2016 the Journal of Economic Perspectives published asymposium on “What is Happening in Game Theory?” Each ofthe participants noted independently that game theory has become sotightly entangled with microeconomic theory in general that thequestion becomes difficult to distinguish from inquiry into the movingfrontier of that entire sub-discipline, which is in turn the l…
What Is Game Theory?
How Game Theory Works
- The key pioneers of game theory were mathematician John von Neumann and economist Oskar Morgenstern in the 1940s.1Mathematician John Nash is regarded by many as providing the first significant extension of the von Neumann and Morgenstern work. The focus of game theory is the game, which serves as a model of an interactive situation among rational p...
Types of Game Theories
- Although there are many types (e.g., symmetric/asymmetric, simultaneous/sequential, etc.) of game theories, cooperative and non-cooperative game theories are the most common. Cooperative game theory deals with how coalitions, or cooperative groups, interact when only the payoffs are known. It is a game between coalitions of players rather than betwee…
Examples of Game Theory
- There are several "games" that game theory analyzes. Below, we will just briefly describe a few of these.
Limitations of Game Theory
- The biggest issue with game theory is that, like most other economic models, it relies on the assumption that people are rational actors that are self-interested and utility-maximizing. Of course, we are social beings who do cooperate and do care about the welfare of others, often at our own expense. Game theory cannot account for the fact that in some situations we may fall i…
How Was Game Theory developed?
Example of Game Theory
- We can use the interaction of asking someone out for a date as a simple example of game theory and how there are game-like aspects involved. If you are asking someone out on a date, you will probably have some kind of strategy to “win” (having the other person agree to go out with you) and “get rewarded” (have a good time) at a minimal “cost” to you (you don’t want to spend a larg…
Elements of A Game
- There are three main elements of a game: 1. The players 2. The strategies of each player 3. The consequences (payoffs) for each player for every possible profile of strategy choices of all players
Types of Games
- There are several different kinds of games that are studies using game theory: 1. Zero-sum game: The players’ interests are in direct conflict with one another. For example, in football, one team wins and the other team loses. If a win equals +1 and a loss equals -1, the sum is zero. 2. Non-zero sum game: The players’ interests are not always in direct conflict, so that there are opportu…
Prisoner’S Dilemma
- The prisoner’s dilemma is one of the most popular games studied in game theory that has been portrayed in countless movies and crime television shows. The prisoner’s dilemmashows why two individuals might not agree, even if it appears that it is best to agree. In this scenario, two partners in crime are separated into separate rooms at the police station and given a similar deal. If one t…
Assumptions Game Theorists Make
- The payoffs are known and fixed.
- All players behave rationally.
- The rules of the game are common knowledge.
Resources and Further Reading
- Duffy, J. (2010) Lecture Notes: Elements of a Game. http://www.pitt.edu/~jduffy/econ1200/Lect01_Slides.pdf
- Andersen, M.L and Taylor, H.F. (2009). Sociology: The Essentials. Belmont, CA: Thomson Wadsworth.