Photo: checkmate chess by Stevepb. Public domain via Pixabay. |
Photo: John von Neumann by LANL. Public domain via Wikimedia Commons. |
Despite the theory’s origins dating back to Neumann and Morgenstern’s work, the economists John Nash, John Harsanyi, and Reinhard Selten received the Nobel Prize for Economics in 1994 for further developing game theory in relation to economics. Here are some interesting facts on the field; from its key influencers and terms, to how it applies in everyday life and examples.
- Game theory can be thought of as an extension of decision theory. In standard decision theory, each agent has utilities associated with outcomes. However, in game theory each agent also has to consider the utilities of other agents and how they will affect the other agent’s decisions and the overall outcome.
- The term ‘Tit for Tat’ is a concept used in the mathematical side of game theory. It is used to describe when a player responds with the same action or move used by an opponent in the previous action or move.
- One of the most celebrated theorems of game theory is referred to as the minimax theorem. This theorem explains that there is always a solution to a conflict between two people with opposing interests.
- “Common Knowledge” is widely used in game theory. This refers to the assumption in games that everyone knows a piece of information but does not essentially know if everyone else knows it too.
- Focal point or Schelling point is one of the many key terms used in game theory. It was developed by the American economist Thomas Schelling in his book The Strategy of Conflict which was published in 1960. Thomas Schelling and Robert J. Aumann both were awarded a noble Prize in economics for developing game theory analysis in 2005.
Source: OUPblog (blog)