Do players know each other’s payoffs (Symmetric vs. Asymmetric)?
These interactions explain market competition, where firms must decide on pricing based on their competitors' likely moves, often resulting in a stable but lower-profit equilibrium. 3. Evolutionary Game Theory: Biology and Beyond
Do they move at the same time (Simultaneous) or one after another (Sequential)?
Game Theory is the mathematical study of strategic decision-making. Unlike traditional decision theory, which focuses on a single agent making choices against a neutral environment, game theory examines scenarios where the outcome for one person depends on the actions of others. It is the science of "interdependence," providing a framework to understand everything from nuclear deterrence to why people tip at restaurants they’ll never visit again. 1. Strategic Decisions: The Rational Foundation
At its core, game theory assumes players are rational and seek to maximize their "utility" (gain). Every "game" consists of three elements: , strategies , and payoffs .
Interaction in game theory is often defined by the . Named after John Nash, this occurs when no player can improve their outcome by changing their strategy while others keep theirs fixed. It is a state of "no regrets." In complex interactions, players must consider:
EGT introduced the concept of the . An ESS is a strategy that, if adopted by a population, cannot be invaded by a rare alternative strategy. For example, the "Hawk-Dove" game explains why animals often use display rituals rather than lethal combat; a population of "Hawks" (constant fighters) risks total injury, while a few "Doves" (retreaters) can survive and pass on their genes by avoiding the costs of war. 4. The Synthesis
The evolution of cooperation is perhaps the most profound application of this field. Through "Iterated Games" (playing the same game repeatedly), players learn that long-term gains from cooperation outweigh short-term gains from betrayal. Strategies like "Tit-for-Tat"—starting with cooperation and then mimicking the opponent’s last move—have shown that simple, reciprocal interactions can lead to the evolution of complex, stable societies. Conclusion
