What Game Theory is All About

Algorithmic game theory is where both algorithm and game theories come into play. It aims to design algorithms around strategic yet at times seemingly unpredictable scenarios just like those in game theory. We’ve previously laid down the foundations of algorithm. Now, it’s time to understand what game theory is all about.

Game theory is all about the different strategies used in making decisions. It takes all the options of the game players and determines whether they are playing in cooperation or in conflict with one another. This will affect the behavior of each player. It will spell out the different choices available to him or her and will determine what happens if he or she chooses one type of action as opposed to the rest. Game theory tackles the willingness of a player to absorb the losses or the profits one is willing to gain over the course of the competition. All these decisions will ultimately affect the final outcome of the scenario or the game.

Game theory was developed back in 1928 when John von Neumann and Oskar Morgenstern worked on the Theory of Games and Economic Behavior. They used the fixed point theory as a focal point in analyzing the behavior of the different players and pegging each behavior and outcome as related to the different factors at play.

These factors include the players, their choices and decisions, the payoffs and the information available. If information is readily available to all players, each one of them will be able to properly predict the other’s decision and the game will be easier. But that’s not always the case. One of the most important concepts in the game is how the players choose to behave. They can either cooperate or go against each other. If everyone’s in conflict with each other then, it’s harder to predict the other’s moves and the payoffs will definitely be lower. The opposite happens if there’s cooperation. The players will find it easier to move around, decisions will have more basis and the payoffs will be greater. Most of the time, players choose to work together and form an alliance due to the fact that collective gains are far greater than individual gains.

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