Game theory is a branch of mathematics that deals with the study of strategic interactions among rational agents. It is used in various fields such as economics, political science, psychology, and biology. The following are some key concepts and terms in game theory.
Key Concepts
- Strategic Interaction: In game theory, players are engaged in a strategic interaction, meaning that their actions depend on the actions of others.
- Rationality: Players are assumed to be rational, meaning that they always choose the action that maximizes their utility.
- Payoff: The outcome of a game is represented by the payoff, which measures the utility that a player receives from the outcome.
- Equilibrium: An equilibrium is a situation where no player has an incentive to change their strategy.
Classic Games
- Prisoner's Dilemma: This is a classic example of a non-cooperative game where two players choose between cooperation and defection.
- Nash Equilibrium: This is a situation where no player can improve their payoff by unilaterally changing their strategy.
- Tit for Tat: This is a strategy where a player cooperates if the other player cooperated in the previous round, and defects if the other player defected.
Real-World Applications
Game theory has many real-world applications, such as:
- Economics: Game theory is used to analyze markets, negotiate contracts, and study the behavior of firms.
- Political Science: Game theory is used to study the behavior of politicians and to analyze political conflicts.
- Psychology: Game theory is used to study the behavior of individuals in social situations.
Further Reading
For more information on game theory, you can read the following articles:
Game Theory Diagram