Written by the Fiveable Content Team • Last updated September 2025
Verified for the 2026 exam
Verified for the 2026 exam•Written by the Fiveable Content Team • Last updated September 2025
Definition
Game theory is a branch of mathematics that studies strategic decision-making. It analyzes the choices individuals make and predicts outcomes based on their rational behavior in competitive situations.
Related terms
Nash Equilibrium: Nash equilibrium is a state in which each player's strategy is optimal given the strategies chosen by others, resulting in no player having an incentive to change their strategy.
Prisoner's Dilemma: The prisoner's dilemma is a classic game theory scenario where two individuals can either cooperate or betray each other. It illustrates how self-interested behavior can lead to suboptimal outcomes for both parties.
Payoff Matrix: A payoff matrix shows the potential outcomes (payoffs) of different strategies for each participant in a game, helping identify the best course of action for each player.