Game theory is the study of mathematical models of strategic interaction among rational decision-makers. It has applications in all fields of social science, as well as in logic, systems science and computer science. Originally, it addressed zero-sum games, in which each participant's gains or losses are exactly balanced by those of the other participants. In the 21st century, game theory applies to a wide range of behavioral relations, and is now an umbrella term for the science of logical decision making in humans, animals, and computers.
In game theory and economic theory, a zero-sum game is a mathematical representation of a situation in which an advantage that is won by one of two sides is lost by the other. If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Thus, cutting a cake, where taking a more significant piece reduces the amount of cake available for others as much as it increases the amount available for that taker, is a zero-sum game if all participants value each unit of cake equally. Other examples of zero-sum games in daily life include games like poker, chess, and bridge where one person gains and another person loses, which results in a zero-net benefit for every player. In the markets and financial instruments, futures contracts and options are zero-sum games as well. Nevertheless, the situation like the stock market etc. is not a zero-sum game because investors could gain profit or loss from share price influences by profit forecasts or economic outlooks rather than gain profit from other investors lost.
In game theory, the Nash equilibrium, named after the mathematician John Forbes Nash Jr., is the most common way to define the solution of a non-cooperative game involving two or more players. In a Nash equilibrium, each player is assumed to know the equilibrium strategies of the other players and no player has anything to gain by changing only their own strategy. The principle of Nash equilibrium dates back to the time of Cournot, who applied it to competing firms choosing outputs.
Combinatorial game theory (CGT) is a branch of mathematics and theoretical computer science that typically studies sequential games with perfect information. Study has been largely confined to two-player games that have a position that the players take turns changing in defined ways or moves to achieve a defined winning condition. CGT has not traditionally studied games of chance or those that use imperfect or incomplete information, favoring games that offer perfect information in which the state of the game and the set of available moves is always known by both players. However, as mathematical techniques advance, the types of game that can be mathematically analyzed expands, thus the boundaries of the field are ever changing. Scholars will generally define what they mean by a "game" at the beginning of a paper, and these definitions often vary as they are specific to the game being analyzed and are not meant to represent the entire scope of the field.
Game theory is the branch of mathematics in which games are studied: that is, models describing human behaviour. This is a glossary of some terms of the subject.
In game theory, a Bayesian game is a game in which players have incomplete information about the other players. For example, a player may not know the exact payoff functions of the other players, but instead have beliefs about these payoff functions. These beliefs are represented by a probability distribution over the possible payoff functions.
In game theory, fictitious play is a learning rule first introduced by George W. Brown. In it, each player presumes that the opponents are playing stationary strategies. At each round, each player thus best responds to the empirical frequency of play of their opponent. Such a method is of course adequate if the opponent indeed uses a stationary strategy, while it is flawed if the opponent's strategy is non-stationary. The opponent's strategy may for example be conditioned on the fictitious player's last move.
In game theory, trembling hand perfect equilibrium is a refinement of Nash equilibrium due to Reinhard Selten. A trembling hand perfect equilibrium is an equilibrium that takes the possibility of off-the-equilibrium play into account by assuming that the players, through a "slip of the hand" or tremble, may choose unintended strategies, albeit with negligible probability.
In game theory, folk theorems are a class of theorems describing an abundance of Nash equilibrium payoff profiles in repeated games. The original Folk Theorem concerned the payoffs of all the Nash equilibria of an infinitely repeated game. This result was called the Folk Theorem because it was widely known among game theorists in the 1950s, even though no one had published it. Friedman's (1971) Theorem concerns the payoffs of certain subgame-perfect Nash equilibria (SPE) of an infinitely repeated game, and so strengthens the original Folk Theorem by using a stronger equilibrium concept: subgame-perfect Nash equilibria rather than Nash equilibria.
In game theory, a repeated game is an extensive form game that consists of a number of repetitions of some base game. The stage game is usually one of the well-studied 2-person games. Repeated games capture the idea that a player will have to take into account the impact of his or her current action on the future actions of other players; this impact is sometimes called his or her reputation. Single stage game or single shot game are names for non-repeated games.
In game theory, an epsilon-equilibrium, or near-Nash equilibrium, is a strategy profile that approximately satisfies the condition of Nash equilibrium. In a Nash equilibrium, no player has an incentive to change his behavior. In an approximate Nash equilibrium, this requirement is weakened to allow the possibility that a player may have a small incentive to do something different. This may still be considered an adequate solution concept, assuming for example status quo bias. This solution concept may be preferred to Nash equilibrium due to being easier to compute, or alternatively due to the possibility that in games of more than 2 players, the probabilities involved in an exact Nash equilibrium need not be rational numbers.
In game theory, a stochastic game, introduced by Lloyd Shapley in the early 1950s, is a repeated game with probabilistic transitions played by one or more players. The game is played in a sequence of stages. At the beginning of each stage the game is in some state. The players select actions and each player receives a payoff that depends on the current state and the chosen actions. The game then moves to a new random state whose distribution depends on the previous state and the actions chosen by the players. The procedure is repeated at the new state and play continues for a finite or infinite number of stages. The total payoff to a player is often taken to be the discounted sum of the stage payoffs or the limit inferior of the averages of the stage payoffs.
In the mathematical theory of games, in particular the study of zero-sum continuous games, not every game has a minimax value. This is the expected value to one of the players when both play a perfect strategy.
The octal games are a class of two-player games that involve removing tokens from heaps of tokens. They have been studied in combinatorial game theory as a generalization of Nim, Kayles, and similar games.
In game theory, Zermelo's theorem is a theorem about finite two-person games of perfect information in which the players move alternately and in which chance does not affect the decision making process. It says that if the game cannot end in a draw, then one of the two players must have a winning strategy. An alternate statement is that for a game meeting all of these conditions except the condition that a draw is not possible, then either the first-player can force a win, or the second-player can force a win, or both players can force a draw. The theorem is named after Ernst Zermelo a German mathematician and logician.
Congestion games are a class of games in game theory first proposed by American economist Robert W. Rosenthal in 1973. In a congestion game the payoff of each player depends on the resources it chooses and the number of players choosing the same resource. Congestion games are a special case of potential games. Rosenthal proved that any congestion game is a potential game and Monderer and Shapley (1996) proved the converse: for any potential game, there is a congestion game with the same potential function.
In algorithmic game theory, a succinct game or a succinctly representable game is a game which may be represented in a size much smaller than its normal form representation. Without placing constraints on player utilities, describing a game of players, each facing strategies, requires listing utility values. Even trivial algorithms are capable of finding a Nash equilibrium in a time polynomial in the length of such a large input. A succinct game is of polynomial type if in a game represented by a string of length n the number of players, as well as the number of strategies of each player, is bounded by a polynomial in n.
A coin-matching game is a confidence trick in which two con artists set up one victim.
Jean-François Mertens was a Belgian game theorist and mathematical economist.
