Game Theory

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Game Theory

Game theory is the science of strategic interaction. By modelling payoffs for multiple players in a game, the notion of a Nash equilibrium is the solution concept used to identify likely outcomes. The model of decision making assumes that individual agents behave selfishly and try to second-guess the decisions of others who they also believe behave selfishly. Another assumption is that agents are rational and will only strive to maximize their own payoffs; so behaviour such as spite or generosity are not considered. The most important academic breakthrough in this domain was the discovery by John Nash that every game had at least one solution in which all agents make a choice that they will not deviate from assuming all else stays equal. The concept of a Nash equilibrium inspired a flurry of academic research into applications of this in games such as Poker, Auctions, Biology, Ecology and other fields.