“Game theory says that the true source of uncertainty lies in the intentions of others” – Peter L. Bernstein
Survival is competition. Whenever two or more beings are faced with constraints such as a fixed number of resources, competition emerges. And from competition stems strategy.
The game theory talks about why and how people make certain decisions. It provides tools to analyse situations in which individuals make interdependent decisions. It is called so as it attempts to comprehend the strategic actions of two players in a given situation containing a set of rules and outcomes.
Animals fight for resources, and countries go to war for land. In a world governed by interdependent agents, the concept of game theory is fundamental.
‘Tit for Tat’ is a familiar term used in the mathematical side of game theory. It describes the situation when a player responds with the same move used by an opponent in the previous action.
‘Common knowledge’ is a widely used concept in game theory. It refers to the assumption that all players know a piece of information but do not essentially know if others are aware of it too.
‘Rock – papers – scissors’ is certainly not a child’s play. Mathematician John Nash proved that any game with a finite number of players and a finite number of options is always a mix of strategies where a single player cannot do better by changing their strategy alone. This theory came to be known as “Nash Equilibria”, and it transformed the field of game theory.
Depiction of the game theory
The ‘Prisoner’s Dilemma’ is an example of why two completely rational individuals might not co-operate and will act selfishly, which will result in a poor choice for both. Further, it shows us that cooperation may not always be in one’s best interests.
Its name originates from a situation that involves two prisoners who would have to either ‘confess’ or ‘not confess’ without knowing what the other would choose.
The Game Theory has also been used in the ongoing war in Ukraine. Experts say that Russia has used the tool of game theory to understand the potential strategies of its opponents.
A central question that arises in one’s mind is – does the game theory really work in real life?
The game theory has proved to be crucial in a myriad of fields. However, whether in co-operative or non–cooperative games, the key rule is that the game theory is dependant on all individuals making rational decisions. With humans involved and real- life stakes at risk, human emotions are introduced in the mix and irrational decisions can be made.
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