Game Theory

Game Theory (GT) is a mathematical modeling framework that analyzes the strategic interaction among rational or irrational agents (individuals, groups, companies, etc). A game consists of a set of players, actions (choices) and strategies. Each player earns a reward (payoff) that depends on her strategy and that of the players she interacts with. Many real-world situations can be modeled as a game and analyzed using game theory, specially, in fields such as Biology, Sociology, Economics, etc. The theory is very useful to unravel and predict human behavior and also provides a framework and analytical tools for understanding a wide range of phenomena that occur in real life and are linked to decision-making by individuals or groups of individuals that interact with each other. Game Theory is particularly advantageous when we study the emergence of cooperative behavior, as it provides deep insights into how social welfare (cooperation) can survive in front of individual selfishness

The first formal theory of games was suggested in 1921 by the mathematician Emile Borel. The well-known mathematician John von Neumann developed it further in 1928 and together with Oskar Morgenstern, comprehensively formalized it in 1944 in their seminal volume «Theory of Games and Economic Behavior», giving rise to what we now know as modern game theory. In turn, a very important step forward followed several years later and is due to John Nash’s contribution of strategic equilibrium: the Nash equilibrium. GT was firstly developed as a tool for understanding economic behavior, but now is applied in many scientific fields. Further refinements to game theory include evolving populations and underlying topologies, among others.