What is game theory and how is it applied?

What is game theory and how is it applied?

Game theory is a mathematical framework for analyzing strategic interactions among rational decision-makers. It's applied in economics, political science, psychology, and more.

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

Sure! A classic example is the Prisoner's Dilemma, where two individuals must decide whether to cooperate or betray each other, impacting their outcomes.

How does game theory relate to economics?

In economics, game theory helps model competitive behaviors, market strategies, and negotiations, allowing for better decision-making.

Are there any real-world applications of game theory?

Yes, game theory is used in various fields, including auction design, pricing strategies, and even in international relations for conflict resolution.

What are some common misconceptions about game theory?

A common misconception is that game theory only applies to zero-sum games, but it actually encompasses a wide range of scenarios, including cooperative games.