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Game Theory

Game theory is a mathematical and economic framework that analyzes decision-making in situations where individuals' choices are interdependent. Originating in 1928 with John von Neumann, it has evolved to include various game types, such as symmetrical, zero-sum, and cooperative games. Its applications span economics, political science, evolutionary biology, and philosophy, illustrating how cooperation can lead to mutual benefits even among self-interested individuals.

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13 views3 pages

Game Theory

Game theory is a mathematical and economic framework that analyzes decision-making in situations where individuals' choices are interdependent. Originating in 1928 with John von Neumann, it has evolved to include various game types, such as symmetrical, zero-sum, and cooperative games. Its applications span economics, political science, evolutionary biology, and philosophy, illustrating how cooperation can lead to mutual benefits even among self-interested individuals.

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Game theory

Game theory is a branch of mathematics and economics that


studies the choice of optimal behavior of an individual when costs
and the benefits of each option are not predetermined, but
they depend on the elections of other individuals.

In economic life, there are countless situations in which two or more


people, companies or countries have to choose strategies and make decisions in
those that are mutually affected. Game theory attempts to analyze these
cases and is used especially in economics to study the markets of
oligopoly and duopoly, where two or more agents make decisions that
affect all participants collectively.

This theory, which conceives individuals aseconomic man(understand that the


player chooses actions that best satisfy their goals based on their
beliefs), and in turn, shows how cooperation leads to the common good of
the agents who carry it out, while the individual action does not. One of the
games most studied by game theory is theprisoner's dilemma.

Origin of game theory

Game theory as a field of study began to exist in 1928, when the


mathematicianJohn von Neumannpublished a series of analyses. During this period,
Studies on game theory focused, above all, on game theory.
cooperatives.

Game theory gained importance throughout the 1950s, when it


they established the first discussions of theprisoner's dilemmaand it was developed
theNash equilibriumthe greatest exponent of non-cooperative games.

Over the past decades, game theory has been deepened.


serving as a basis for creating applications in various areas.

Game categories

There are thousands of games, such as Parcheesi, chess, or basketball. All of them
they can be divided into different categories, let's take a look at the main ones:

Symmetrical or asymmetrical: a symmetrical game is one in which the


rewards and punishments for each player are the same. They are examples of
symmetric games the game of the hawk and the dovethe prisoner's dilemmay
the hunting of the deer, in its standard characteristics. Most of the
2×2 games are symmetrical. In contrast, the ultimatum game and the game of
dictators are asymmetrical.
Zero-sum or non-zero-sum games: when one player wins, the other
loses exactly the same amount. Chess, go, poker, and the game
the bear are zero-sum games. Even the stock market is a zero-sum game.
zero (excluding commissions). The prisoner's dilemma is a game
of a sum different from zero, just like football, since if it is a draw, one wins
one point, but if you win, you get three (if winning added two like
In the past, it would indeed be a zero-sum game.
Cooperative or non-cooperative games: cooperative games are
those in which two or more players form a team to achieve
a goal, the optimal strategies for groups of individuals are analyzed,
assuming that they can reach agreements among themselves about the
most appropriate strategies.
Nash equilibriumthe final solution reached is a balance in the
that none of the players gain anything by modifying their strategy
as long as the other or others maintain theirs. That is to say, none of the
parts can change their individual decision without worsening.
Simultaneous or sequential: in the sequential ones, each player acts.
after another, while in the simultaneous ones they act at the same time.
On perfect or imperfect information: in information games
perfect all players know what the others have done
previously.

Applications of game theory

Game theory has a multitude of applications in different fields,


highlighting economic science, political science, evolutionary biology, or even
philosophy.

Regarding the economy and business, while we understand byeconomy, the


social science that studies the way to manage available resources, this of
for it already provides all the ingredients for a game. The researchers of
this branch of game theory has focused on studying the markets of
duopoly and oligopoly.

In political science, game theory has not had the same impact in the
political science than in economics. Perhaps this is due to the fact that people ...
drives less rationally when what is at stake are ideas that
when what is at stake is your money. However, it has become
an important instrument to clarify the underlying logic of a certain
number of more paradigmatic problems.

In biology, game theory has been widely used to


understand and predict certain outcomes of evolution, such as the concept
of stable evolutionary strategy introduced by John Maynard Smith in his
essay "Game Theory and the Evolution of Struggle" Evolution of Struggle
as in his book "Evolution and Game Theory".
Regarding philosophy, game theory can demonstrate that even the
more selfish individuals may find that at times, cooperating with others
it can serve its own interests.

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