# What Is a Game Game Theory?

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Martha Robinson

Game theory is a mathematical framework that helps us understand how people make decisions in competitive situations. It is used to analyze the behavior of individuals and organizations in strategic settings where the outcome of a decision depends on the choices of others.

The Basics

At its core, game theory is concerned with understanding how people make decisions when they are interacting with others. It assumes that individuals are rational and will act in their own self-interest to maximize their payoff or utility. In game theory, a payoff can be anything from money to prestige or happiness.

The Components of a Game

A game consists of players, strategies, payoffs, and rules. Players are the actors who make decisions in the game.

Strategies are the possible actions that players can take. Payoffs are the rewards associated with each outcome of the game. Rules determine how the game is played and what actions are allowed.

## Types of Games

There are many types of games in game theory, but some common ones include:

• Prisoner’s Dilemma: A classic example where two criminals have to decide whether to cooperate with each other or betray each other.
• Chicken: Another classic example where two drivers drive towards each other and must decide whether to swerve or collide.
• Battle of the Sexes: A scenario where a couple has to decide which movie to watch together.
• Auction: A situation where multiple buyers bid for an item being sold by a single seller.

### Nash Equilibrium

One important concept in game theory is Nash equilibrium, named after mathematician John Nash. A Nash equilibrium occurs when all players have chosen their best strategy given what they expect others will do.

The Applications

Game theory has applications in fields like economics, political science, psychology, and biology. It has been used to study everything from voting behavior to arms races to the evolution of animal behavior.