Basics of Game Theory
Welcome! I'm really looking forward to exploring the fascinating world of game theory with you today. It's a powerful tool that helps us understand everything from business rivalries to daily social habits.
Before we dive into the fun stuff, I'd love to learn a little bit more about you. To help me tailor our session, could you tell me why you're interested in learning about Game Theory? Also, how familiar are you with the subject already?
I'm a complete beginner, just curious about how it works!
It is awesome to have you here! Since you are completely new to this, we will start from scratch.
At its core, game theory is the study of mathematical models of strategic interaction. But don't let the word "mathematical" scare you. It is really just a structured way of looking at situations where people, companies, or even animals have to make decisions.
game theory
noun
The formal study of decision-making where several players must make choices that potentially affect the interests of the other players.
The absolute key to understanding game theory is a concept called strategic interdependence.
In a normal, non-strategic situation, your success only depends on your own choices. For example, if you are deciding whether to bring an umbrella today, your decision doesn't change the weather, and the weather isn't actively trying to outsmart you.
But in a "game," means that your best choice depends entirely on what other people do—and they are making their choices based on what they think you are going to do!