Game theory is a branch of mathematics that deals with decision-making processes in strategic situations, where the outcome depends on the choices of multiple participants. It has applications in economics, political science, psychology, biology, and many other fields. But how did game theory start?
The origins of game theory can be traced back to ancient civilizations such as Greece and China, where philosophers and strategists analyzed military conflicts and other competitive situations. However, the modern formalization of game theory began in the 20th century with the work of several mathematicians and economists.
One of the pioneers of game theory was John von Neumann, a Hungarian-American mathematician who worked on many fields including quantum mechanics, computer science and economics. In 1928, he published a paper called “Zur Theorie der Gesellschaftsspiele” (“On the Theory of Social Games”), which introduced some fundamental concepts such as zero-sum games and mixed strategies.
Zero-sum games are games in which one player’s gain is exactly balanced by another player’s loss. For example, chess is a zero-sum game because if one player wins, the other player loses. Mixed strategies are strategies that involve randomization or uncertainty to achieve better outcomes in certain situations.
Another important figure in game theory was John Nash, an American mathematician who received the Nobel Prize in Economics for his contributions to the field. In his doctoral dissertation “Non-Cooperative Games” (1950), Nash introduced the concept of Nash equilibrium, which describes a situation where no player has an incentive to change their strategy given what others are doing.
Nash equilibrium is used to analyze many situations such as oligopoly markets (where there are only a few dominant firms), voting systems (where individuals have different preferences), and even evolutionary biology (where species compete for resources).
Other notable contributors to game theory include Oskar Morgenstern and John Harsanyi who developed cooperative game theory (where players can form coalitions and share rewards), and Thomas Schelling who applied game theory to social phenomena such as segregation and nuclear deterrence.
In conclusion, game theory has a rich history that spans centuries and involves many disciplines. Its formalization in the 20th century by mathematicians and economists has led to many important insights in understanding decision-making processes in strategic situations. Whether you’re playing a board game with friends, negotiating a business deal, or analyzing geopolitical conflicts, game theory provides a powerful framework for making better decisions.