We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Game Theory?

By Brendan McGuigan
Updated May 23, 2024
Our promise to you
Language & Humanities is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At Language & Humanities, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Game theory is a branch of mathematics that aims to lay out in some way the outcomes of strategic situations. It has applications in politics, inter-personal relationships, biology, philosophy, artificial intelligence, economics, and other disciplines. Originally, it attempted to look only at a fairly limited set of circumstances, those known as zero sum games, but in recent years its scope has increased greatly. John von Neumann is looked at as the father of modern game theory, largely for the work he laid out in his seminal 1944 book, Theory of Games and Economic Behavior, but many other theorists, such as John Nash and John Maynard Smith, have advanced the discipline.

Since game theory became established as a discipline in the 1940s, and since it became even more embedded in mathematics and economics through John Nash’s work in the 1950s, a number of practitioners of this subject have won Nobel Prizes in Economics.

Game theory basically works by taking a complex situation in which people or other systems interact in a strategic context. It then reduces that complex situation to its most basic "game," allowing it to be analyzed and for outcomes to be predicted. As a result, it allows for prediction of actions that otherwise could be extremely difficult, and sometimes counter intuitive, to understand. One simple game most people are very familiar with is Rock, Paper, Scissors, which is used by some game theorists, although because of its lack of information it does not have a great deal of relevance on real world situations.

One of the most important examples of a widely-known game is referred to as the Prisoner’s Dilemma. In this scenario, we imagine two criminals captured by the police after committing a crime, such as robbing a bank of $10 million US Dollars (USD) together. They are each placed in separate rooms, and the police ask for them to confess. If one prisoner confesses, while the other doesn’t, the confessor is let off free to keep the $10 million USD for themselves, while the other will go to jail for four years. If neither confess, they will both be let off for lack of evidence, and will each keep $5 million USD. If both confess, their sentences are reduced for cooperating, but they still both spend a year in jail.

The Prisoner’s Dilemma is important in game theory for a number of reasons, and is expanded on to arrive at much more complex situations. The most intelligent decision to make in the situation given in the Prisoner’s Dilemma is to confess, no matter what. It minimizes personal risk, and outweighs the personal gain of both being let off free. As with many games in game theory, this simple game can be expanded to many different situations in the real world with similar circumstances: an easy example is two businesses competing in the market, where it is in both parties’ best interest to set high prices, but even better to set a low price while the competitor sets a high price.

Other famous game theory games include the Cake Cutting game, the Stag Hunt, the Dollar Auction, the Coordinators Game, the Dictator Game, and the Ultimatum Game. Games are generally separated into two categories, depending on whether they are zero-sum, meaning the gains gained by one player or group of players are equaled by the losses by others, or non-zero-sum.

Language & Humanities is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
By arod2b42 — On Dec 14, 2010


Do you really think people can be put into stereotypes or "categorical roles" that easily? I believe that there is more to people than simply functionality that is chartable by logic and mathematics. John Nash seems to have missed this fact.

By GigaGold — On Dec 12, 2010


Many other fields have employed game theory in maximizing their effect. Part of Operations Management is researching leadership patterns of managers and determining the best suitable job and efficiency for them and their respective employees. Game theory comes into play when the psychology of a group is taken into account and requires some intuition in regards to where a person's skills will work best.

By BostonIrish — On Dec 09, 2010

In more advanced game theory, people fit into certain categorical roles which determine what their actions are most likely to be. Depending on someone's historical tendencies, based on psychological patterns, environmental conditioning, childhood experience, etc., they may be more inclined to take an aggressive or random stance in certain game contexts than others, and therefore can be expected to work certain ways. "Understanding your opponent" becomes an important factor when seeking to use game theory to ones best advantage.

Language & Humanities, in your inbox

Our latest articles, guides, and more, delivered daily.

Language & Humanities, in your inbox

Our latest articles, guides, and more, delivered daily.