Game Theory: Basics
Strategies, payoffs and equilibria.
Key idea
Strategies, payoffs and equilibria.
In depth
A game specifies players, strategies, and payoffs. In a payoff matrix, each cell lists both players’ results. A dominant strategy is best regardless of what others do. Rational choices can still lead to bad outcomes, as in the prisoner’s dilemma.
Worked example
Prisoner’s dilemma: both defecting is the dominant outcome even though both cooperating is better for each.
Real-world uses
- Analysing pricing wars between shops, auctions and negotiations
Common mistake
Assuming the other player will act in the group’s interest.
How to learn this
- Read the key idea and say it in your own words.
- Work through the worked example, then try a similar problem.
- Use the interactive lesson’s visual and mini-quiz to check the pattern.
Frequently asked questions
What is Game Theory: Basics?
Strategies, payoffs and equilibria. It is a topic at the expert level in Differential Equations, Abstract Algebra & Applied Math.
Where is Game Theory: Basics used in real life?
Real-world examples: Analysing pricing wars between shops, auctions and negotiations.
What should I learn before Game Theory: Basics?
Make sure you are comfortable with Dynamic Programming, the previous topic in Differential Equations, Abstract Algebra & Applied Math.
What is a common mistake with Game Theory: Basics?
Assuming the other player will act in the group’s interest.
How can I practise Game Theory: Basics?
Open the interactive lesson, play with the visual, then answer the three-question mini-quiz. Getting two right marks the topic complete.
What comes after Game Theory: Basics?
Move on to Nash Equilibrium next.
Related expert topics in Differential Equations, Abstract Algebra & Applied Math
- Exact Equations – M dx + N dy = 0 with Mᵧ = Nₓ.
- Bernoulli Equations – Substitute v = y¹⁻ⁿ to linearise.
- Runge–Kutta Methods – Higher-accuracy numerical solvers.
- Second-Order Homogeneous Equations – Use the characteristic equation.
- Undetermined Coefficients – Guess the particular solution form.
- Variation of Parameters – General method for particular solutions.