Game theory is a branch of applied mathematics that is used in the social sciences, most notably in economics, as well as in biology

(particularly evolutionary biology and ecology),engineering, political science, international relations, computer science, and philosophy. Game theory attempts to mathematically capture behavior in strategic situations, in which an individual's success in making choices depends on the choices of others. While initially developed to analyze competitions in which one individual does better at another's expense (zero sum games), it has been expanded to treat a wide class of interactions, which are classified according to several criteria. Today, "game theory is a sort of umbrella or 'unified field' theory for the rational side of social science, where 'social' is interpreted broadly, to include human as well as non-human players Traditional applications of game theory attempt to find equilibria in these games. In an equilibrium, each player of the game has adopted a strategy that they are unlikely to change. Manyequilibrium concepts have been developed (most famously the Nash equilibrium) in an attempt to capture this idea. These equilibrium concepts are motivated differently depending on the field of application, although they often overlap or coincide. This methodology is not without criticism, and debates continue over the appropriateness of particular equilibrium concepts, the appropriateness of equilibria altogether, and the usefulness of mathematical models more generally. Although some developments occurred before it, the field of game theory came into being with the 1944 book Theory of Games and Economic Behavior by John von Neumann and Oskar Morgenstern. This theory was developed extensively in the 1950s by many scholars. Game theory was later explicitly applied to biology in the 1970s, although similar developments go back at least as far as the 1930s. Game theory has been widely recognized as an important tool in many fields. Eight game theorists have won the Nobel Memorial Prize in Economic Sciences, and John Maynard Smith was awarded the Crafoord Prize for his application of game theory to biology.

Representation of Games
The games studied in game theory are well-defined mathematical objects. A game consists of a set of players, a set of moves (or strategies) available to those players, and a specification of payoffs for each combination of strategies. Most cooperative games are presented in the characteristic function form, while the extensive and the normal forms are used to define noncooperative games. The extensive form can be used to formalize games with some important order. Games here are often presented as trees (as pictured to the left). Here each vertex (or node) represents a point of choice for a player. The player is specified by a number listed by the vertex. The lines out of the vertex represent a possible action for that player. The payoffs are specified at the bottom of the tree. The extensive form can also capture simultaneous-move games and games with imperfect information. To represent it, either a dotted line connects different vertices to represent them as being part of the same information set (i.e., the players do not know at which point they are), or a closed line is drawn around them.

Then Player 1 gets a payoff of 4. 3 0. which are specified by the number of rows and the number of columns. –1 3. the game is usually presented in extensive form. without knowing the actions of the other. and Player 2 gets 3. Each player has two strategies. 4 Normal form or payoff matrix of a 2-player. it plays against the complementary coalition ( ) as if they were playing a 2-player game. The equilibrium payoff of C is characteristic. 2-strategy game Characteristic Function Form In cooperative games with transferable utility no individual payoffs are given. The payoffs are provided in the interior. the second is the payoff for the column player (Player 2 in our example). When a game is presented in normal form. Now there are . at least. strategies.Normal Form The normal (or strategic form) game is usually represented by a matrix which shows the players. assumed that when a coalition C forms. one chooses the row and the other chooses the column. and payoffs (see the example to the right). The first number is the payoff received by the row player (Player 1 in our example). it is presumed that each player acts simultaneously or. the characteristic function determines the payoff of each coalition. If players have some information about the choices of other players. More generally it can be represented by any function that associates a payoff for each player with every possible combination of actions. 0 –1. In the accompanying example there are two players. Player 2 chooses Left Player 1 chooses Up Player 1 chooses Down Player 2 chooses Right 4. Suppose that Player 1 plays Up and that Player 2 playsLeft. The origin of this form is to be found in the seminal book of von Neumann and Morgenstern who. The standard assumption is that the empty coalition obtains a payoff of 0. Instead. when studying coalitional normal form games.

and consumers. So. One or more solution concepts are chosen. Descriptive Use . but not all games in characteristic function form can be derived from normal form games. It was initially developed in economics to understand a large collection of economic behaviors. can be faulty.different models to derive coalitional values from normal form games. In non-cooperative games. This assumption. however. scholars have applied game theory to help in the understanding of good or proper behavior Economics & Business Economists have long used game theory to analyze a wide array of economic phenomena. and psychological behaviors as well. markets. sociological. fair division. A set of strategies is a Nash equilibrium if each represents a best response to the other strategies. game theory has also been used to attempt to develop theories of ethical or normative behavior. including auctions. The payoffs of the game are generally taken to represent the utility of individual players. and voting systems and to model across such broad classifications as behavioral economics[2] and industrial organization. The use of game theory in the social sciences has expanded. oligopolies. Often in modeling situations the payoffs represent money. Application & Challenges Game theory has been used to study a wide variety of human and animal behaviors. the most famous of these is the Nash equilibrium. if all the players are playing the strategies in a Nash equilibrium. Economists and business professors suggest two primary uses: descriptive and prescriptive. In economics and philosophy. which presumably corresponds to an individual's utility. since their strategy is the best they can do given what others are doing. In addition to being used to predict and explain behavior. A prototypical paper on game theory in economics begins by presenting a game that is an abstraction of some particular economic situation. they have no unilateral incentive to deviate. These "solution concepts" are usually based on what is required by norms of rationality. duopolies. including behaviors of firms.[3] This research usually focuses on particular sets of strategies known as equilibria in games. Naturally one might wonder to what use should this information be put. and game theory has been applied to political. bargaining. and the author demonstrates which strategy sets in the presented game are equilibria of the appropriate type. social network formation.

In the Prisoner's Dilemma. but rather provide an explanation for why populations that play Nash equilibria remain in that state. irrationality. However. Game theorists respond by comparing their assumptions to those used in physics. Some scholars believe that by finding the equilibria of games they can predict how actual human populations will behave when confronted with situations analogous to the game being studied. This particular view of game theory has come under recent criticism. For instance. Game theorists may assume players always act in a way to directly maximize their wins (theHomo economicus model). human behavior often deviates from this model. the Prisoner's dilemma presents another potential counterexample. First. some scholars see game theory not as a predictive tool for the behavior of human beings. see Guess 2/3 of the average. Some game theorists have turned to evolutionary game theory in order to resolve these worries. in some cases it is appropriate to play a nonequilibrium strategy if one expects others to play non-equilibrium strategies as well. the question of how populations reach those points remains open. this use for game theory has also come under criticism. but as a suggestion for how people ought to behave. Despite the name. evolutionary game theory does not necessarily presume natural selection in the biological sense. First.[4] Alternatively. For an example. Computer science & Logic . in the centipede game. However. guess 2/3 of the averagegame. people regularly do not play Nash equilibria. Second. it is criticized because the assumptions made by game theorists are often violated. Prescriptive & Nominative Analysis On the other hand. they can treat game theory as a reasonable scientific ideal akin to the models used by physicists. Explanations of this phenomenon are many.The first known use is to describe how human populations behave. and the dictator game. fictitious play dynamics). However. but in practice. additional criticism of this use of game theory has been levied because some experiments have demonstrated that individuals do not play equilibrium strategies. Thus while their assumptions do not always hold. Since a Nash equilibrium of a game constitutes one's best response to the actions of the other players. some authors claim that Nash equilibria do not provide predictions for human populations. each player pursuing his own self-interest leads both players to be worse off than had they not pursued their own self-interests. new models of deliberation. There is an ongoing debate regarding the importance of these experiments. Evolutionary game theory includes both biological as well as cultural evolution and also models of individual learning (for example. playing a strategy that is part of a Nash equilibrium seems appropriate. These models presume either no rationality or bounded rationality on the part of players. or even different motives (like that of altruism).

[12] Other authors have attempted to use evolutionary game theory in order to explain the emergence of human attitudes about morality and corresponding animal behaviors. (2004)). the k-server problem. In so doing. In addition. Also. and Alai-Tafti et al. begun by Thomas Hobbes. These authors look at several games including the Prisoner's . In addition. In particular. markets. Separately. 1994). The emergence of the internet has motivated the development of algorithms for finding equilibria in games. some authors have attempted to pursue the project. Philosophers who have worked in this area include Bicchieri (1989. Following Lewis (1969) game-theoretic account of conventions. computational auctions.Game theory has come to play an increasingly important role in logic and in computer science.V. Lewis (1969) used game theory to develop a philosophical account of convention.[11] In ethics. game theory has played a role in online algorithms. and especially of online algorithms.[10] and Stalnaker (1999). This later suggestion has been pursued by several philosophers since Lewis (Skyrms (1996). Since games like the Prisoner's dilemma present an apparent conflict between morality and selfinterest. Kokalis. Responding to two papers by W. he provided the first analysis of common knowledge and employed it in analyzing play in coordination games. 1993). This general strategy is a component of the general social contract view in political philosophy (for examples. and security and information markets. game theory provides a theoretical basis to the field of multi-agent systems. peer-to-peer systems. Yao's principle is a game-theoretic technique for proving lower bounds on the computational complexity of randomized algorithms. Ullmann Margalit (1977) and Bicchieri (2006) have developed theories of social norms that define them as Nash equilibria that result from transforming a mixed-motive game into a coordination game. and what are the consequences of this knowledge for the social outcomes resulting from agents' interactions. of deriving morality from self-interest. explaining why cooperation is required by self-interest is an important component of this project. Several logical theories have a basis in game semantics. Grim. computer scientists have used games to model interactive computations. The field of algorithmic game theory combines computer science concepts of complexity and algorithm design with game theory and economic theory. Quine (1960. Borodin & Karp et al. see Gauthier (1986) and Kavka (1986). Philposphy Game theory has been put to several uses in philosophy. which has in the past been referred to as games with moving costs and request-answer games (Ben David.[8] Game theory has also challenged philosophers to think in terms of interactive epistemology: what it means for a collective to have common beliefs or knowledge.O. he first suggested that one can understand meaning in terms of signaling games. 1967).[9] Skyrms (1990).

however. For instance the legal system requires them to adhere to their promises. Skyrms (1996. not on who is playing them. Some scholars would consider certain asymmetric games as examples of these games as well.dilemma. for a game to have identical strategies for both players. For example. yet be asymmetric. Cooperative games focus on the game at large. the game pictured to the right is asymmetric despite having identical strategy sets for both players. and the stag hunt are all symmetric games. the most common payoffs for each of these games are symmetric. Some assumptions used in some parts of game theory have been challenged in philosophy. For instance. It is possible. The so-called Nash-programme[clarification needed] has already established many of the cooperative solutions as noncooperative equilibria. e. . Considerable efforts have been made to link the two approaches. Often it is assumed that communication among players is allowed in cooperative games. but not in noncooperative ones.. Symmetric & Asymmetric A symmetric game is a game where the payoffs for playing a particular strategy depend only on the other strategies employed. psychological egoism states that rationality reduces to self-interest—a claim debated among philosophers Types of Games Cooperative & Non Cooperative A game is cooperative if the players are able to form binding commitments. If the identities of the players can be changed without changing the payoff to the strategies. the ultimatum game and similarly the dictator game have different strategies for each player. Many of the commonly studied 2×2 games are symmetric. but these play in a non-cooperative fashion. This classification on two binary criteria has been rejected (Harsanyi 1974). Of the two types of games. and the Nash bargaining game as providing an explanation for the emergence of attitudes about morality (see. noncooperative games are able to model situations to the finest details. 2004) and Sober and Wilson (1999)). For instance.g. coalitions of players are formed in a cooperative game. the prisoner's dilemma. In noncooperative games this is not possible. Most commonly studied asymmetric games are games where there are not identical strategy sets for both players. Hybrid games contain cooperative and non-cooperative elements. However. then a game is symmetric. Stag hunt. The standard representations of chicken. producing accurate results.

a gain by one player does not necessarily correspond with a loss by another. and extensive form is used to represent sequential ones. because one wins exactly the amount one's opponents lose. Many games studied by game theorists (including the famous prisoner's dilemma) are non-zero-sum games. The difference between simultaneous and sequential games is captured in the different representations discussed above. Perfect Information & Imperfect Information . but not to the fundamental economic situation in which there are potential gains from trade. This need not be perfect informationabout every action of earlier players. whose losses compensate the players' net winnings simultaneous and sequential Simultaneous games are games where both players move simultaneously. Other zero-sum games include matching pennies and most classical board games including Go and chess. in which choices by players can neither increase nor decrease the available resources. or if they do not move simultaneously. normal form is used to represent simultaneous games. Poker exemplifies a zero-sum game (ignoring the possibility of the house's cut).Zero Sum & Non Zero Sum Zero-sum games are a special case of constant-sum games. For instance. while he does not know which of the other available actions the first player actually performed. for every combination of strategies. It is possible to transform any game into a (possibly asymmetric) zerosum game by adding an additional dummy player (often called "the board"). In zero-sum games the total benefit to all players in the game. in non-zero-sum games. a player benefits only at the equal expense of others). always adds to zero (more informally. because some outcomes have net results greater or less than zero. Informally. Often. the later players are unaware of the earlier players' actions (making them effectively simultaneous). although this isn't a strict rule in a technical sense. a player may know that an earlier player did not perform one particular action. Sequential game (or dynamic games) are games where later players have some knowledge about earlier actions. it might be very little knowledge. Constant-sum games correspond to activities like theft and gambling.

are generally finished in finitely many moves. go. which is a similar concept. as studied by economists and real-world game players. has important consequences in descriptive set theory. is often added (Osborne & Rubinstein 1994). moves.) The existence of such strategies. While these situations are not game theoretical. and where the only outcomes are "win" or "lose"—for which neither player has a winning strategy. mancala. Complete information requires that every player know the strategies and payoffs of the other players but not necessarily the actions. with the winner (or other payoff) not known until after all those moves are completed. although there are some interesting examples of perfect-information games. and set theorists in particular study games that last for infinitely many moves. that have a finite number of players. It is only with two or more players that a problem becomes game theoretical. that there are games— even with perfect information. but simply on whether one or the other player has a winning strategy. for cleverly designed games. events.An important subset of sequential games consists of games of perfect information. using the axiom of choice. This player is not typically . Differential games such as the continuous pursuit and evasion game are continuous games. Pure mathematicians are not so constrained. Cournot competition is typically modeled with players' strategies being any non-negative quantities. Thus. outcomes. For instance. also known as "moves by nature". Discrete & Continuous Games Much of game theory is concerned with finite. discrete games. since in simultaneous games not every player knows the actions of the others. A game is one of perfect information if all players know the moves previously made by all other players. only sequential games can be games of perfect information. however. including the ultimatum game and centipede game. including fractional quantities. (It can be proven. they are modeled using many of the same tools within the discipline of decision theory. The focus of attention is usually not so much on what is the best way to play such a game. Many concepts can be extended. Infintely Long Games Games. etc. A randomly acting player who makes "chance moves". Continuous games allow players to choose a strategy from a continuous strategy set. Perfect-information games include also chess. Most games studied in game theory are imperfect-information games. Perfect information is often confused with complete information. One Player & Many Players Games Individual decision problems are sometimes considered "one-player games". and arimaa.

considered a third player in what is otherwise a two-player game. Metagames seek to maximize the utility value of the rule set developed. but finite number of players are often called n-person games MetaGames These are games the play of which is the development of the rules for another game. . Subsequent developments have led to the formulation of drama theory. The term metagame analysis is also used to refer to a practical approach developed by Nigel Howard (Howard 1971) whereby a situation is framed as a strategic game in which stakeholders try to realise their objectives by means of the options available to them. the target or subject game. Games with an arbitrary. but merely serves to provide a roll of the dice where required by the game. The theory of metagames is related to mechanism design theory.