Are you interested in understanding how people make decisions in strategic situations? If so, then a game theory course might be the perfect fit for you! In this article, we will dive into what you can expect to learn in a game theory course and how it can benefit your understanding of decision-making.
What is Game Theory?
Game theory is the study of mathematical models of conflict and cooperation between intelligent rational decision-makers. It is used in economics, political science, psychology, and many other areas to help us understand how individuals or groups interact with each other.
In a game theory course, you will start by learning the basics of games. A game is a situation where two or more players have to make decisions that affect each other’s outcomes. You will learn about different types of games such as zero-sum games where one player’s gain is the other player’s loss and non-zero-sum games where both players can benefit or lose.
Example: Rock-Paper-Scissors is a classic example of a zero-sum game. If one player wins, the other player loses.
John Nash was an American mathematician who made significant contributions to game theory. In his honor, the Nash equilibrium was named after him. It is a concept used to analyze strategic interactions between two or more decision-makers.
The Nash equilibrium is reached when each player makes their best decision given the decisions made by others. In simpler terms, no player can improve their outcome by changing their strategy if everyone else sticks to their strategy.
Example: Let’s say there are two gas stations on opposite sides of town. They both have two options: either raise prices or lower prices.
If they both lower prices, they both benefit from increased sales. However, if one lowers prices while the other raises them, customers are more likely to go to the cheaper option. The Nash equilibrium is reached when both gas stations lower their prices.
Game theory has a wide range of applications in various fields. In economics, it is used to analyze market competition and pricing strategies. In political science, it is used to understand voting behavior and international relations.
Game theory can also be applied in everyday situations such as negotiating a salary or deciding who pays for dinner. By understanding the principles of game theory, you can make better decisions that benefit you in the long run.
In summary, a game theory course teaches you how to analyze strategic interactions between decision-makers. You will learn about different types of games, Nash equilibrium, and real-world applications. By taking this course, you will develop a deeper understanding of decision-making that can be applied in various areas of your life.