Use of Game Theory in Economics

Game theory is a known as mathematical process for analyzing calculated circumstances, such as in games, where a person’s wining based upon the selections of others. In other words, it is “the study of mathematical process of cooperation and conflict between intelligent rational decision-makers. The subject first defined zero-sum games, such that one person’s gets exactly equal net losses of the other participants.

Game theory has found its requirement in numerous fields kike Economics, Social Science, Evolutionary Biology and Political Science. Game theory is now using its applications in computer science. The nature of computing is modifying because of arrival of internet and the revolution in information technology.

What is game theory?

Game theory is the formal study of cooperation and conflict. Game theoretic ideas apply whenever the actions of various agents are interdependent. These agents can be individuals, firms, groups, or any combination of these.

Game theory will be regarded as a multi-agent decision problem. Which seems there are several people contending for limited payoffs/ rewards. They have to prepare certain moves on which their payoff lies. These people have to follow certain principle while making these moves. Each player is supposed to act rationally.

Nash equilibrium: Nash equilibrium, also Known as strategic equilibrium, is a list of strategies, one for every player, which has the property that no player will unilaterally modify his strategy and get a best payoff.

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