Introduction to Game Theory
Game theory is the study of decision-making in situations where two or more individuals or organizations are interacting. The key assumption of game theory is that each actor, called a player, is rational and seeks to maximize their own payoff or utility. This means that each player evaluates the possible outcomes of their decisions and chooses the one that benefits them the most. The outcomes of a game depend on the strategies chosen by each player, and each strategy has a corresponding payoff. In this way, game theory provides a framework for analyzing strategic interactions and predicting outcomes in various contexts.
For example, consider the game of rock-paper-scissors. Each player has three possible strategies, and the outcome of the game depends on which strategy each player chooses. If both players choose rock, the game is tied. If one player chooses rock and the other chooses scissors, the first player wins. If both players choose the same strategy, the game is tied. This simple game illustrates the basic concepts of game theory, such as strategies and payoffs.
Game theory is used in a wide range of fields, including economics, political science, biology, and computer science. It has applications in areas such as auction design, voting systems, and conflict resolution. By analyzing strategic interactions and predicting outcomes, game theory provides a valuable tool for understanding and influencing decision-making in various contexts.
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