Game theory analyzes the logic of interactive decision making

Mondo Finance Updated on 2024-02-15

Game theory is a mathematical theory and method for studying decisions and behaviors between individuals or groups that have interdependencies. It can be used to analyze a wide variety of competition and cooperation scenarios, including economic, political, military, biological, and other fields.

1. The basic concepts of game theory

In game theory, the individuals or groups involved in the game are calledPlayers, each player has a set to choose fromStrategy。Each strategy will result in the player gaining a certain amount ofEarnings, and the size of the gain depends on the choice of other players.

The core concepts of game theory are:Nash equilibrium, which refers to the choice that each player choosesOptimal strategy, and none of the players will beUnilateral change of strategyto improve their earnings.

2. Classification of game theory

Game theory can be classified according to different criteria, the common ones are the following:

According to the number of players: Divided intoTwo-player gamewithMultiplayer gambling

According to the policy space: Divided intoLimited strategy gamewithInfinite strategy games

According to the information structure: Divided intoComplete information gamewithIncomplete information game

According to the earnings structure: Divided intoZero-sum gamewithNon-zero-sum game

3. Applications of game theory

Game theory has been widely used in a variety of fields, including:

Economics: Research on market competition, pricing strategies, auction mechanisms, etc.

Political Science: Study election strategy, international relations, negotiations, etc.

Military science: Study war tactics, arms races, etc.

Biology: Study animal behavior, evolutionary strategies, etc.

4. The Case of Game Theory

There are many classic cases of game theory, such as:

The Prisoner's Dilemma: shows the contradiction between cooperation and betrayal.

Smart pig game: illustrates the dilemma of "Pareto optimal".

Eagle pigeon game: Strategies for deterrence and cooperation are analyzed.

5. Summary

Game theory is a powerful tool for analyzing interactive decision-making, and it can help us understand a variety of complex competition and cooperation phenomena. By learning game theory, we can improve the quality of our decisions and be more successful in the competition.

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