Definition
Game Theory serves as a tool in simulation to study the interactions of individuals (players) in contexts of social dilemmas or conflict. It models the problem of Rational Decision-Making where the outcome depends on the strategies of all participants.
Why It Matters
Game theory in simulation allows us to move beyond ‘dumb’ physics and model the complex, strategic behavior of human agents; without it, we cannot accurately predict how markets, crowds, or soldiers will react to changing incentives and competitive pressures.
Core Concepts
- Types of Game Theory:
- Cooperative: Players can communicate to form coalitions.
- Non-Cooperative: Players act individually without knowing the others’ choices.
- Strategic Interaction: Observing how interactions between players influence the “best course of action.”
- Classic Models:
- Prisoner’s Dilemma: A conflict between individual self-interest (defection) and collective interest (cooperation).
- Tit-for-Tat: A successful strategy in repeated games where a player mimics the opponent’s previous move.
- Founders: John von Neumann and Oskar Morgenstern.