Abstract

Game theory studies situations of strategic interaction. An interaction between two or more players is said to be strategic when the outcomes do not depend on the individual actions of the agents involved, but rather on the joint actions of the agents involved. Chess is a typical example, in which the choice to make a specific move depends on strategic considerations about what the other player is going to do, as the outcome of the game will depend on both players’ moves. Other typical examples of strategic interactions include firms competing for business, politicians competing for votes, animals fighting over prey, bidders competing in an auction, threats and promises in long-term relationships, (be they between spouses, parents and children, co-workers or nuclear super-powers), and so on. Game theory studies the strategic decisions of players. Players can be profit-maximizing firms, expected utility rational maximizers, but also animals, computer-generated artificial agents, or, in evolutionary game theory, entities that lack any natural or artificial rational ability, such as genes. In more recent years, behavioral game theory (Camerer 2003) has emerged to study the behavior of boundedly rational, flesh-and-bone agents.