What is game theory and how does it work?

What is game theory and how does it work?

Game theory is a mathematical framework for analyzing strategic interactions among rational decision-makers. It helps in understanding how individuals or groups make decisions in competitive situations.

Can you give me an example of a game theory scenario?

Sure! A classic example is the Prisoner's Dilemma, where two criminals must decide whether to cooperate with each other or betray one another. The best outcome for both is to cooperate, but if one betrays while the other cooperates, the betrayer gets a lighter sentence.

What are some real-world applications of game theory?

Game theory is used in various fields, including economics, political science, psychology, and biology. For instance, it helps in understanding market competition, negotiation strategies, and even evolutionary biology.

Are there different types of games in game theory?

Yes, there are several types, including cooperative vs. non-cooperative games, zero-sum games, and extensive vs. normal form games. Each type has its own rules and strategies.