Game theory is a branch of mathematics and economics that studies how individuals or entities make strategic decisions when their actions depend on the choices of others.
It has wide-ranging applications, from economics and political science to biology and computer science. In game theory, various types of games are used to model and analyze different strategic situations. In this article, we get a bird's eye view of the types of games in Game Theory.
For a detailed illustration of Game Theory and its application in International Relations, read this article.
Let's delve into some of the fundamental types of games in game theory.
Simultaneous games are perhaps the most common type of game in everyday life. In these games, all players make their decisions simultaneously, without knowing the choices of others.
A classic example is the Prisoner's Dilemma, where two suspects must decide whether to cooperate or betray their partner to the authorities. The outcome of each player's decision depends on their choice and the other player's, leading to various possible products.
Sequential games involve a sequence of moves where each player observes the previous players' choices before making their own decisions. Chess is an excellent example of a sequential game. In chess, players take turns, and the outcome depends not only on your move but also on your opponent's moves. Sequential games introduce the element of anticipation and strategic planning.
Cooperative games differ from competitive games because players can form coalitions and work together to achieve common goals. In these games, players negotiate and make agreements to maximize their collective benefits.
Cooperative games are often used to model business partnerships, where companies collaborate for mutual gain. The Shapley value is frequently used to allocate the value created by cooperation fairly among the participants.
Non-cooperative games, on the other hand, involve situations where players act independently and there is no formal agreement to cooperate. These games often lead to Nash equilibria, where no player can benefit by changing their strategy unilaterally.
The concept of Nash equilibrium, introduced by John Nash, is fundamental in non-cooperative games and has applications in various fields.
Zero-sum games are a specific subset of non-cooperative games where the loss of another exactly balances the gain of one player. In other words, the total payoff in a zero-sum game is always zero. Poker is an example of a zero-sum game, where one player's winnings equal another player's losses.
Finding optimal strategies in zero-sum games is a crucial focus of game theory, and it has practical applications in economics and military strategy.
Stochastic games introduce an element of uncertainty into decision-making. In these games, the outcome depends not only on the players' choices but also on random events or chances.
Examples of stochastic games can be found in various fields, from gambling to evolutionary biology, where randomness plays a significant role in determining outcomes.
Game theory offers a versatile framework for understanding and analyzing strategic interactions in various fields. The different types of games discussed above provide a foundation for modelling and studying multiple situations, from competitive scenarios to cooperative endeavours.
By delving into these types of games, researchers and decision-makers can gain valuable insights into the dynamics of strategic decision-making and ultimately make more informed choices in complex real-world situations.
Edited by: Whitney Edna Ibe
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