Posted in
Theories Articles
Famous Hungarian-American mathematician John von Neumann and German-Austrian economist Oskar Morgenstern take the credit for creating the ‘game theory’. Their first classic book ‘The theory of games and economic behavior’ led to the birth of this ‘game theory’. This book was written by Neumann with the respected mathematical economist Oskar Morgenstern. Being an economist, Oskar Morgenstern contributed with ideas from neoclassical economics.
Game theory can be said as a different and clear study of human mind track. It is actually a child of applied mathematics which is used along the lines of economics. Game theory studies the cardinal inter-relation between agents. An agent in economics is defined as a model which is effective in solving a particular problem. For example, consider a market situation where there is buy and sell of goods. To solve problems related to sell-purchase, the buyer and the seller constitute an agent or a model. Now, game theory is about strategies. According to this theory the agents choose strategies which help to maximize their profits. The strategies chosen should be such that they return more than the profits generated by strategies of other agents. This theory can be applied to social situations where people who make decisions correspond with agents. Game theory thus, enhances the simpler efficient approach to neo-classical economics.
The theory has evolved extensively after 1944 from the book, ‘The theory of games and economic behavior’. Over the years, the game theory has played a significant role in social sciences. Not only social sciences it is now used in varied diverse fields. Starting from around 1970 the game theory has been applied to not just economics related issues but also to animal behavior. The game theory played a large role in the evolutionary theory. ‘Bankruptcy’, ‘Prisoner's Dilemma’ are some of the famous games studied in the game theory. The games studied under this theory, are defined by set rules of mathematics. Each game has a fixed number of players, rule. There is a fixed number of strategies available to all these players. This also has an output as a specific profit or benefit for each combination of these strategies. For example, the ideas, situations and strategies studied from the ‘prisoner’s dilemma’ game are used in ethics and political situations.
On certain fronts game theory does seem similar to the decision theory. However there is a distinct difference between the two. In game theory the strategies are formulated in an atmosphere where the agents interact with each other. Game theory studies options. However the benefits from these options does not depend only upon the strategies of the individual making that option. The profits and the losses depend on the strategies of the other agents working in that environment.
Recently, game theory has gone beyond addressing social or economic issues. The wide scope and benefits of this theory has attracted the attention of computer engineers and scientists. Game theory is now-a-days even used in artificial intelligence and cybernetics.
This content item (id=60; title='Game Theory') is Comment (based on its SectionID), but it has no parent Article (its parentid=0). Please ensure that there are Comments only in this 'Section for comments': id=5; title='Theories Articles'.
Please register or login to add your comments to this article.
