Game Theory

Abstract

Game theory is a mathematical technique for the analysis of conflict of interest situations. It was introduced by E. Borel in 1921. The theory was generally established by J. von Neumann in 1928, and brought to wide notice in 1944 by J. von Neumann and O. Morgenstern in their book, [V9], Theory of Games and Economic Behavior. A conflict is comprised of participants who freely select various outcomes from a list of alternatives. While the conflicting outcomes may put the players at cross purposes, there may also be room for cooperation among some of them. Game theory attempts to abstract the essential elements of large classes of such competitive situations, put them into mathematical models, and use the scientific approach to analyze these problems. It is concerned with helping participants make the best choices and providing them with a guide for rational behavior when faced with these decisions. The decision makers in real-life problems are overwhelmingly preoccupied with the conflict of interest, be it in business, in politics, or in the military.