References :
-
Colin F. Camerer, “Behavioral Game Theory: Experiments in Strategic Interaction” – Introductory material for a Game Theory class at Princeton University. http://press.princeton.edu/chapters/i7517.ht
-
Theodore L. Turocy, "What is Game Theory?" – Research report that contains background information on game theory, and it's lasting impact. http://www.cdam.lse.ac.uk/Reports/Files/cdam-2001-09.pdf
-
Bernard Walliser, "The Principles of Game Theory" – This resource includes a brief introduction on game theory, and the different game and strategies involved. http://www.pse.ens.fr/users/walliser/pdf/cog_game.pdf
Purpose and Need
Upon the creation of game theory, it became and continues to be a prime tool for modeling and as an automated decision-making processes for interactive environments (2). It’s a mathematical tool that provides for the structuring and analyzing problems of strategic choice. The formal process of modeling a situation as a game allows the decision maker to explicitly state the players and their strategic options, as well as consider their choices and reactions. The purpose of game theory is to study the strategic relations between supposedly rational players and explores the consequences of a player’s action on the actions of the other players. Game theory’s most important field of application is economic theory. The economic system is considered a game between producers and consumers who go through the intermediation of the market, and game theory is needed to understand and predict situations and outcomes outside the realm of perfectly competitive markets. (3)
History/development
Game Theory was established by John Von Neumann and Oskar Morgenstern in 1944. A few years later a solution was proposed by John Nash describing how rational players would play, this went on to be called the Nash Equilibrium. This idea is that players would adjust their strategies until no player could benefit from changing. Where each player would choose a strategy that maximizes their utility and is the best response given the other player’s strategies. In the 1960’s there was the realization that the behavior of the players changed radically depending on whether it was a one-shot game, or a sequence of one-shot games. As well as, the value of public versus private information on each player which holds a large impact on the result of the game. In 1994, John Nash, John Harsanyi, and Reinhard Selten were awarded the Nobel Prize of Economics for their path breaking contributions.
Since then, Game Theory has expanded into social sciences, as well as economics and biology. (1)
Overview
​
Upon the creation of game theory, it became and continues to be a prime tool for modeling and as an automated decision-making processes for interactive environments. It’s a mathematical tool that provides for the structuring and analyzing problems of strategic choice. The formal process of modeling a situation as a game allows the decision maker to explicitly state the players and their strategic options, as well as consider their choices and reactions.