Define: Game Theory

Game Theory
Game Theory
Quick Summary of Game Theory

Game theory is a branch of mathematics and economics that studies strategic interactions between rational decision-makers, known as players, in situations where the outcome of each player’s choice depends on the choices made by others. It provides a framework for analysing the behaviour of individuals or entities in competitive or cooperative settings, such as negotiations, business competitions, political conflicts, and social interactions. Game theory models various types of games, including zero-sum games, where one player’s gain is another player’s loss, and non-zero-sum games, where cooperation can result in mutual benefit. Game theory helps predict and understand outcomes, strategies, and optimal decisions in complex situations by analysing the incentives, preferences, and actions of the players involved. It has applications in economics, political science, biology, computer science, and other fields, providing valuable insights into human behaviour and decision-making processes.

Full Definition Of Game Theory

Game theory is a mathematical approach that includes strategic decisions of market agents to predict the probable market situation. To explain in simple terms, game theory is a strategic attempt to study human behaviour, in which an individual’s decision to make choices is depended on choices of others.

Basic Elements of Game Theory

Great mathematician John von Neumann is known to be the founder of game theory. Representation of games is a major element of game theory. Games are situations in which at least a single agent is allowed to maximize his utility through anticipating the responses of one or more agents. The agents are known as players. Each game includes strategies, where strategy is a predetermined situation according to which the player who maximizes profit makes his move.

The games of game theory are represented in varied order according to the strategies.

The representation of games is a significant aspect of game theory.

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This glossary post was last updated: 29th March, 2024.

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