What is Game Theory in Economics?

Besides Cricket, poetry, tweeting, Friends and Fun there is another thing which is very important and that is to study the course books :P but as the Cricket season has surrounds us all i thought why not study some thing that matches the interest so i chose "The Game Theory" Lets start with the definition!

Definition 1:


"Game theory is the science of strategy. It attempts to determine mathematically and logically the actions that “players” should take to secure the best outcomes for themselves in a wide array of “games.” The games it studies range from chess to child rearing and from tennis to takeovers. But the games all share the common feature of interdependence. That is, the outcome for each participant depends on the choices (strategies) of all. In so-called zero-sum games the interests of the players conflict totally, so that one person’s gain always is another’s loss. More typical are games with the potential for either mutual gain (positive sum) or mutual harm (negative sum), as well as some conflict."Definition 2:Set of concepts aimed at decision making in situations ofcompetition and conflict (as well as of cooperation andinterdependence) under specified rules. Game theoryemploys games of strategy (such as chess) but not of chance (such as rolling a dice).Definition 3:
Game theory attempts to look at the relationships between participants in a particular model and predict their optimal decisions.Definition 4:

A mathematical method of analysis used in operational research to predict the outcomes of games of strategy and conflicts of interest. It is used to assess the likely strategies that people will adopt in situations governed by a particular set of rules and to identify the best approach to a particular problem or conflict. Explanation:

1. Game theory was pioneered by Princeton mathematician john von neumann.
2. In the early years the emphasis was on games of pure conflict (zero-sum games).
3. Other games were considered in a cooperative form.
4. That is, the participants were supposed to choose and implement their actions jointly. Recent research has focused on games that are neither zero sum nor purely cooperative.
5. In these games the players choose their actions separately, but their links to others involve elements of both competition and cooperation.
6. The essence of a game is the interdependence of player strategies.
7. There are two distinct types of strategic interdependence: sequential and simultaneous.
8. In the former the players move in sequence, each aware of the others’ previous actions.
9. In the latter the players act at the same time, each ignorant of the others’ actions.

Examle :

Strategic moves. A player can use threats and promises to alter other players’ expectations of his future actions, and thereby induce them to take actions favorable to him or deter them from making moves that harm him. To succeed, the threats and promises must be credible. This is problematic because when the time comes, it is generally costly to carry out a threat or make good on a promise. Game theory studies several ways to enhance credibility. The general principle is that it can be in a player’s interest to reduce his own freedom of future action. By so doing, he removes his own temptation to renege on a promise or to forgive others’ transgressions.

If you have any query about Game theory or If you have some good definition to share must tell me :-) and You can also read Game Theory at http://en.wikipedia.org/wiki/Game_Theory

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