What is Game Theory?

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What is Game Theory?

Game theory is a branch of mathematics that aims to lay out in some way the outcomes of strategic situations. Game theory has applications in politics, inter-personal relationships, biology, philosophy, artificial intelligence, economics, business and other disciplines. Originally, game theory attempted to look only at a fairly limited set of circumstances, those known as zero sum games, but in recent years its scope has increased greatly.

Brief history

John von Neumann is looked at as the father of modern game theory, largely for the work he laid out in his seminal 1944 book, Theory of Games and Economic Behavior, but many other theorists, such as John Nash and John Maynard Smith, has advanced the discipline.

Since game theory became established as a discipline in the 1940s, and since it became even more embedded in mathematics and economics through John Nash’s work in the 1950s, a number of practitioners of game theory have won Nobel Prizes in Economics.

Game Theory's Most Important Minds

John von Neumann, whose 1944 book Theory of Games and Economic Behavior, written with Oscar Morgenstern, made him arguably the founding father of modern game theory

John Nash, whose story was told in the film A Beautiful Mind and whose achievements have helped make him one of the best-known game theorists

Kenneth Arrow, whose famous "impossibility theory" proved that designing a fundamentally unflawed voting system is essentially impossible

Barry Nalebuff and Adam Brandenberger, whose 1996 book on Co-Competition offered modern business an innovative rethinking of the competitiveness.

How does it work?

Game theory basically works by taking a complex situation in which people or other systems interact in a strategic context. It then reduces that complex situation to its most basic "game," allowing it to be analyzed and for outcomes to be predicted. As a result, game theory allows for prediction of actions that otherwise could

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