What is game theory

Game theory is a branch of mathematics that studies strategic interactions between individuals in situations where the outcome is uncertain. It can be used to analyze any situation involving competition, negotiation, or cooperation. It helps us understand how different people make decisions and anticipate the reactions of their opponents. Game theory is used in many fields including economics, biology, politics, military strategy, and more. It can be used to model situations such as auctions, international trade, and the stock market. Game theory has also been used to explain how two countries might engage in an arms race or how two companies might compete in the same market. Examples of game theory in action include the Prisoner’s Dilemma, the Hawk-Dove game, and the Iterated Prisoner’s Dilemma. In the Prisoner’s Dilemma, two suspects are arrested and separately offered a deal to reduce their sentences if they both confess to the crime. The Hawk-Dove game is used to explain the behavior of members of a species competing for a limited resource. In the Iterated Prisoner’s Dilemma, two players repeatedly play the game and must decide whether to cooperate or compete with each other. Game theory has also been used to explain political behavior. For example, it can be used to explain why countries cooperate with each other or why they compete for resources. It can also be used to explain why countries enter into alliances or why they might enter into arms races. Fun Fact: John Nash, the Nobel Prize-winning mathematician and economist, is considered the father of game theory. He developed the Nash Equilibrium, which is a key concept in game theory.