Game theory is a branch of applied mathematics and economics that provides a framework for analyzing strategic interactions among rational decision-makers. It is used to model and predict outcomes in situations where the decisions of multiple agents affect each other.
Players, Strategies, and Payoffs: Game theory involves players who choose among strategies to maximize their payoffs. The outcomes depend on the strategies chosen by all players involved.
Equilibria: Key concepts include Nash Equilibrium, where no player can benefit by changing their strategy unilaterally, and dominant strategies, which yield the best payoff regardless of others' actions.
Economics and Business: analyzing market competition, auction design, and incentive structures within firms. It helps in understanding competitive decision settings where agents act in their self-interest.
Political Science and Sociology: applied to study strategic interactions in political negotiations and social dilemmas, such as the tragedy of the commons and public goods games.
Biology and Psychology: models evolutionary strategies and psychological behaviors, providing insights into cooperation and competition in biological systems.
Education: model interactions among students and faculty to optimize learning outcomes and strategies.
The next module will discuss how Game Theory was developed. Click below to take you to the next page: