Pillar · Competition & Cooperation
Game theory
Game theory is the study of strategic decision-making: how rational players choose actions when each one’s outcome depends on the choices of all, and how those interdependent choices settle into predictable equilibria.
Game theory studies interdependent decisions — situations where the smart move for you depends on what everyone else does, and vice versa. Its central tool is the equilibrium: a configuration of choices from which no one wants to unilaterally deviate. The concepts below build on each other, from the single-player idea of a dominant strategy up to the failures of cooperation that show up everywhere from prisons to fisheries.
Core concepts
Dominant Strategy
Why "confess" beats staying silent no matter what your partner does.
Nash Equilibrium
Why does everyone stay put even when they could all do better? The strategy point nobody wants to leave alone.
Prisoner's dilemma
Why two rational actors betray each other even when cooperation would help them both.
Schelling Point
How do two strangers meet in a city with no phones — and why does everyone guess the same spot?
Tit-for-Tat
Why does copying your opponent's last move beat every clever strategy?
Tragedy of the Commons
Why do rational individuals destroy the shared resource they all depend on?
Comparisons
- Nash equilibrium vs dominant strategy
One describes a single player's best move; the other describes the whole game sitting in a stable configuration.
- Prisoner's dilemma vs tragedy of the commons
Same logic of self-interest wrecking the group — two prisoners in cells versus a whole village at one well.
- Zero-sum game vs Positive-sum game
Whether the pie is fixed or can grow — and why that one fact flips optimal play from competition to cooperation.
FAQ
What is game theory in simple terms?
Game theory is the math of strategic situations — any setting where your best move depends on what others do, and theirs depends on you. It predicts how rational players will act and where their choices come to rest, from poker and pricing to arms races and evolution.
Who invented game theory?
John von Neumann and Oskar Morgenstern founded modern game theory with their 1944 book Theory of Games and Economic Behavior. John Nash extended it in 1950 with the Nash equilibrium, which lets the theory handle games beyond simple zero-sum conflicts.
What is game theory used for?
Game theory is used across economics, political science, biology, computer science, and business. It models auctions, pricing, bargaining, voting, evolution of cooperation, network effects, and AI agent design — anywhere outcomes hinge on the interacting choices of multiple decision-makers.